Tennessee committee advances CO rollback for acute care, adds freestanding ERs and cardiac cath to phased "lensure" process

The Tennessee House Health Committee on Monday voted to advance a certificate-of-need (CO) reform bill after adopting two amendments that change when and how certain services exit the CO review process.

Representative Garrett, the bill sponsor, said the committee adopted amendment 014451 to correct an effective date and later allowed an untimely amendment (014596) that moves freestanding emergency departments (FSEDs) and cardiac catheterization services out of CO on July 1, 2027. Garrett told the committee the bill still removes "acute care" from the CO statute effective July 1, 2030 but that the new amendment folds FSEDs and cardiac cath into a phased "lensure" process and requires those services to be hospital-affiliated to prevent stand-alone private-equity entrants.

Why it matters: Hospital executives told the committee the changes could upend financing that keeps rural hospitals operating. Tina Prescott, president and CEO of West Tennessee Healthcare, said removing CO protections risks "the potential collapse of an internal subsidy model" that uses higher-margin services, such as elective surgery and advanced imaging, to support unprofitable but essential services including obstetrics, emergency care and behavioral health. "Stripping away CO protections leaves us unable to operate a safety-net provider," Prescott said.

The Tennessee Hospital Association—s Lacy Blair said THA— s executive committee was neutral on the delayed repeal of acute-care CO protections but "strongly opposed" the immediate removal of FSEDs and cardiac cath, arguing the change "moves beyond the current discussion" and shifts financial and service-line risk onto hospitals that provide 24/7 emergency and trauma coverage.

Scott Tungate, CEO of Mon Community Hospital, testified about the fragile finances of critical access hospitals and how losing the 35-mile rural protection used in federal calculations can trigger loss of critical access designation and rapid closure. "If a critical access hospital in Tennessee loses its designation, it will close within a year," Tungate said, adding that his hospital "has lost money three of the past five years." He urged caution before altering protections that support small rural hospitals.

Proponents argued CO inhibits competition and investment. Representative Garrett and other supporters said the lensure approach keeps important safeguards but allows lower-capital options such as hospital-affiliated FSEDs to expand access without the time and expense of CO applications. "The market needs to drive those decisions," Garrett told colleagues, arguing the change could let communities add services without the full capital cost of building a new hospital.

Legal clarification: Heather Asbel of legal services told the committee that the bill defines "acute care hospital" within its text for the bill—s purposes as "a hospital with a primary focus of patients with an average length of stay of 25 days or less," and that the 35-mile radius associated with critical access protections is a federal standard.

Vote and next steps: The committee approved House Bill 819 as amended by voice and roll call; the clerk recorded 23 ayes and 2 nays. The bill now moves to the Finance, Ways and Means Committee as amended.

What remains unsettled: Witnesses and members raised unresolved questions about how the lensure process will work in practice, whether hospital-affiliation requirements will be enforced at the point of certificate issuance, and whether new entrants might still "cherry-pick" profitable services, eroding the payer mix that sustains rural hospitals. The committee did not vote on additional guardrails beyond the hospital-affiliation language.