Virginia’s Certificate of Public Need (COPN) law has long stated, as a guiding principle, the development and maintenance of health care services and access to those services by every person who needs them without respect to their ability to pay. In granting a COPN to develop a new health care facility or resource, the State Health Commissioner has authority to condition the award of a certificate on the applicant’s agreement to provide a certain amount of care to individuals considered indigent. Thus, for years, holders of COPNs with charity care conditions have been required to annually submit a form to the Division of Certificate of Public Need (DCOPN) documenting compliance with charity care conditions. A pair of new laws will change the way COPN holders report compliance with charity care conditions and will require reporting of charity care by organizations that hold COPNs that do not have charity care conditions.
In 2017 the Virginia General Assembly passed, and the Governor signed, House Bill 2101 to reform the process for the calculation and reporting of charity care information. Prior to the change, many COPN holders and policy makers expressed confusion and dissatisfaction regarding the methods with which COPN reporting and compliance review processes were conducted. The changes under HB 2101 became fully effective July 1, 2019. An additional bill passed in 2019 also directs the State Health Commissioner to review charity care conditions on certificates at least once every three years to determine whether conditions continue to be appropriate or should be revised. The new law also permits a certificate holder to request changes to conditions. Most importantly, non-nursing home holders of any COPN without a charity care condition who opt to provide charity care now must report charity care provided on an annual basis.
Before the changes effective July 1, 2019, there was no definition of “charity care” in the COPN statute. Because health care organizations used different methods to categorize and value charity care, it was difficult to compare the relative contributions of two or more health care organizations in providing care to the indigent. Significant variations in valuation of charity care occurred based on variations in reporting methods, typically relying on the valuation of charity care and overall services provided based on “gross charges” for such services as set by each COPN holder. “Gross charges” represented prices set in excess of many multiples of the actual reimbursement rate received by providers for services by Medicare, Medicaid, and other third-party payors and did not compare well between providers.
The 2017 law seeks to address disparities in definitions and methodologies by defining a uniform definition of “charity care” and creating a new reporting system. This advisory explores the 2017 definition and some lingering issues for providers holding or seeking COPNs. Final regulations implementing the new law have been published are effective August 23, 2019. 
New Definition of Charity Care
Charity Care, previously undefined in the Code of Virginia, is now defined as:[H]health care services delivered to a patient who has a family income at or below 200 percent of the federal poverty level and for which it was determined that no payment was expected (i) at the time the service was provided because the patient met the facility's criteria for the provision of care without charge due to the patient's status as an indigent person or (ii) at some time following the time the service was provided because the patient met the facility's criteria for the provision of care without charge due to the patient's status as an indigent person. "Charity care" does not include care provided for a fee subsequently deemed uncollectable as bad debt. For a nursing home as defined in § 32.1-123, "charity care" means care at a reduced rate to indigent persons.
Thus, the law now states that only those services provided without charge to patients with a family income below 200% of the Federal Poverty Line (FPL) qualify as charity care. The new definition does not permit COPN holders to count bad debt toward charity care. Services provided to Medicaid beneficiaries are also not counted toward charity care, despite any low level of reimbursement.
Notably, the new definition does not expressly permit COPN holders (as previously permitted per the language included in many past COPN conditions), other than nursing homes, to count as charity care sliding scale or reduced fee services. Also not included in the definition are any free or reduced fee services provided to individuals above 200% of the FPL, as had previously been permitted. Historically, many certificates have been issued with lengthy definitions of charity care that have included such categories. Unless requested, certificates awarded going forward may not include such language and new COPN holders will be held to the new, more restrictive, definition of charity care.
New Calculation Method and Reporting Requirements to Virginia Health Information
Under the new law, COPN holders no longer calculate the charity care value based on gross charges. Instead, the total value of COPN authorized services and the total value of charity care provided using such services are calculated based on the most generous Medicare reimbursement rate (other than for nursing homes). Outpatient services will be valued based on Current Procedural Terminology (CPT) codes, while inpatient services will be valued based on Diagnosis Related Group (DRG) codes.
The law imposes a new mandatory requirement that both inpatient and outpatient facilities annually report COPN conditioned charity care to DCOPN or its contractor, Virginia Health Information (VHI). Nursing facilities without current charity care conditions are exempt from the new law and are not required to report charity care. Data provided must include:
In conjunction with VHI, VDH has already issued letters instructing inpatient and outpatient providers on how to submit the required data. Inpatient facilities must provide a spreadsheet with data elements that permit VHI to link the data to VHI’s inpatient database in order to calculate the estimated cost of care and estimated Medicare reimbursement for inpatient charity care services provided. Outpatient facilities must provide all the CPT codes used at the facility and identify those codes written off as charity care.
Alternative Methods of Compliance with Charity Care Conditions Still Permitted
Despite the new mandatory reporting requirements, a separate annual filing to DCOPN showing compliance with charity care conditions is still required and still controls whether or not the conditions on a COPN have been met. DCOPN has not yet determined how the new data reported to VHI will be used to confirm or audit data provided to DCOPN on annual charity care reports.
Importantly, while the new law changes the method of calculating charity care to the Medicare DRG and CPT-based data collected by VHI, there has been no change in how alternate means of showing charity care compliance is measured per existing guidance. Department regulations continue to state that the commissioner may condition the approval of an application for a project on three criteria:
Thus, COPN applicants awarded new certificates and wishing to maintain maximum flexibility in ways to meet their charity care obligation may wish to discuss with DCOPN the specific wording of any charity care condition placed on a certificate prior to acceptance of any condition.
DCOPN guidance continues to outline several methods by which COPN holders may satisfy the conditions placed upon their certificate. Under existing guidance, conditions on COPNs will be considered met on an annual basis when the COPN holder reports the provision of indigent care by the COPN conditioned service at a rate equal to or greater than that established on the COPN. Alternatively, for holders of COPNs where the condition includes language allowing the facilitation and development of primary care for underserved populations, any shortfall in charity care may be made up through the facilitation and development of primary care for underserved populations. Facilitation and development of primary care for underserved populations may be accomplished through new efforts or initiatives to provide primary care to indigents or direct payments to any organization that VDH has authorized to receive and distribute contributions satisfying COPN conditions. Thus, those COPN holders that demonstrate compliance with charity care conditions through efforts to develop primary care or direct contributions to approved organizations may continue to do so.
Compliance Plans May Satisfy Charity Care Shortfalls
Failure to comply with a charity care condition may result in civil monetary penalties and other remedies. Providers which fail to satisfy a charity care obligation within a given year still have three compliance plan options to meet the condition and avoid a civil penalty or (more likely) problems with future COPN applications. First, the COPN holder can make direct payments to an organization authorized by the Department via a memorandum of understanding to receive contributions satisfying the conditions of a certificate or to a private nonprofit foundation that funds basic insurance coverage for indigents authorized by the Department via a memorandum of understanding to receive contributions satisfying conditions of a certificate. Second, the COPN holder can provide other documented initiatives or efforts to provide primary or specialized care to underserved populations. Third, in the event that a COPN holder holds more than one certificate and one of the certificates does not meet the requirements, then the conditions of the certificate which are not met can be met by providing care at a reduced rate to indigent persons in excess of the amount required by another certificate issued to the same holder, in an amount approved by the Department only if such care is offered at the same facility.
Preparing for the Change
As with any regulatory change, the new reporting requirements and calculation method for charity care will likely cause disruption and surprise for some COPN holders. Already, VDH’s November 2018 report to the General Assembly calculating charity care using the new methodology exposed disparities among reporting organizations that were not previously reflected under the old methodology. COPN holders seeking to meet charity care conditions should ensure that data collected accurately and completely reflect the charity care services provided as compared to overall services performed. Those COPN holders who are not on track to fulfill COPN conditions through the provision of no-cost care to the indigent may want to consider enhanced outreach efforts or proactively identify opportunities to satisfy conditions using the alternative methods available. In addition, based on the 2019 change in the law, certificate holders whose ability to meet existing charity care conditions has changed based on Medicaid expansion or other factors may wish to consult with legal counsel regarding a potential request for a change in a charity care condition. Finally, non-nursing home holders of COPNs without charity care conditions who opt to provide charity care must now be prepared to submit charity care reports.
Should you have any questions related to the new charity care reporting requirements or the COPN process in general, please contact Peter Mellette, Nathan Mortier or Elizabeth Dahl at Mellette PC.
This client advisory is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice.
 HB 2766 (2019 Session) (revising Va. Code §§ 32.1-102.2 and -102.4.
 12 VAC 5-220-155 (Available at: http://register.dls.virginia.gov/vol35/iss24/v35i24.pdf)
 Va. Code § 32.1 – 102.1.
 Va. Code 32.1-276.5.C.
 In 12 VAC 5-220-270 (A) and 12 VAC 5-220-420(A).
 VDH guidance document titled "Compliance with Conditions on Certificates of Public Need" dated March 29, 2004.
 Va. Code §§ 32.1-27, -27.1, -102.4(F).