On March 3, 2025, Connecticut Governor Ned Lamont signed a law establishing a new process for hospitals in bankruptcy to apply for an “emergency certificate of need” (CON) to approve a transfer of ownership. The law, titled “An Act Concerning An Emergency Certificate Of Need Application Process For Transfers Of Ownership Of Hospitals That Have Filed For Bankruptcy Protection, The Assessment Of Motor Vehicles For Property Taxation, A Property Tax Exemption For Veterans Who Are Permanently And Totally Disabled And Funding Of The Special Education Excess Cost Grant” (the “Act”), was passed by the Connecticut Legislature though its emergency certification process in order to expedite its approval, presumably to allow the law and new process to be available for CON review of the potential sale(s) of Prospect Medical hospitals in Connecticut expected this year.

Emergency CON Process

Under the Act, the emergency CON process is to be available when “(1) the hospital subject to the transfer of ownership has filed for bankruptcy protection in any court of competent jurisdiction, and (2) a potential purchaser for such hospital has been or is required to be approved by a bankruptcy court.”

The Act requires the Office of Health Strategy (OHS) to:

• Develop an emergency CON application for parties to utilize, and in doing so OHS must “identify any data necessary to analyze the effects of a hospital’s transfer of ownership on health care costs, quality and access in the affected market.”
  • Notably, if the buyer is a for-profit entity, OHS is permitted to require additional information to ensure that the continuing operation of the hospital is in the public interest.
• Make a “completeness” determination on a submitted application within 3 business days.

Once an emergency CON application is deemed complete, OHS may – but is not required to – hold a public hearing within 30 days thereafter, and if a hearing is held OHS must notify the applicant(s) at least 5 days in advance of the hearing date. The Act provides that a public hearing or other proceeding related to review of an emergency CON is not a “contested case” under the state’s Uniform Administrative Procedure Act, which limits the procedural and appeal rights of the applicant(s). The Act also allows OHS to contract with third-party consultants to analyze the effects of the transfer on cost, access, and quality in the community, with the cost borne by the applicant(s) and not to exceed $200,000.

Emergency CON Decisions and Conditions

The Act requires final decisions on emergency CONs to be issued within 60 days of the application being deemed complete. Importantly, OHS is required to “consider the effect of the hospital’s bankruptcy on the patients and communities served by the hospital and the applicant’s plans to restore financial viability” when issuing the final decision. The Act also permits OHS to “impose any condition on an approval of an emergency” CON, as long as OHS includes its rationale (legal and factual) for imposing the condition and the specific CON criterion that the condition relates to, and that such condition is reasonably tailored in time and scope. The Act also expressly provides that any condition imposed by OHS on the approval of an emergency CON will apply to the applicant(s), including any hospital subject to the transfer of ownership “and any subsidiary or group practice that would otherwise require” a CON under state law that is part of the bankruptcy sale. However, the Act does allow the applicant(s) to request a modification of conditions for good cause, including due to changed circumstances or hardship.

Finally, the Act provides that the final decision on an emergency CON, including any conditions imposed by OHS as part of the decision, is not subject to appeal.

Takeaways

The Act seeks to establish a clear expedited pathway for CON review of hospital (and health system) sales as part of the bankruptcy process. The specific process, including the form of application, is likely to be rolled out quickly by OHS to be available as part of the resolution of the Prospect Medical bankruptcy process anticipated to occur during 2025. The ultimate efficacy of the process will depend upon the specific data sought as part of the emergency CON process, and on the scope of any conditions imposed by OHS on the sales (which could introduce uncertainty into the bankruptcy sale and approval process), but the establishment of this avenue for review is likely to be welcomed by parties to hospital system bankruptcy actions.