Request By:
Mr. Steven L. Beshear
Stites & Harbison
2300 Lexington Financial Center
Lexington, Kentucky 40507
Opinion
Opinion By: Frederic J. Cowan, Attorney General; Richard C. Carroll, Assistant Attorney General
This is in response to your letter of August 15, 1990, requesting an interpretation of the exemptions provided by KRS 216B.020(2)(a) to private offices and clinics of physicians in regard to the Certificate of Need, hereafter CON, and licensure provisions found in other sections of Chapter 216B.
According to your letter, the Lexington Clinic, a multifaceted medical facility operated by numerous physicians as a professional service corporation, some of whom perform routine outpatient surgical procedures, are looking into applying to become certified by Medicare as an ambulatory surgical center. According to discussions with associates of your office, this certification will not involve the purchase of any new equipment, additional office space or include the performance of any medical procedures not presently being performed by physicians at the clinic. Instead, such certification will allow the clinic to obtain Medicare reimbursement for the treatment of patients insured under that plan. However, the federal regulations associated with ambulatory surgical center certification mandate that such a facility "comply with state licensure requirements." See 42 CFR § 416.40. Therefore, a question arises as to whether the clinic has to obtain a license from state authorities to operate such a facility in order to be reimbursed through the Medicare program. However, this requirement appears to be inconsistent with the exemption from licensure provided to "private offices and clinics" of physicians under KRS 216B.020(2)(a). Nevertheless, apparently you have been informed by counsel for the Commission for Health Economics Control, hereafter the Commission, that the clinic, while presently exempt, must obtain a license if it seeks to obtain Medicare reimbursement. According to your letter, counsel for the Commission also indicated that if the clinic must be licensed, it must also obtain a CON. In order to resolve this conflict, you requested an opinion on whether:
1. A private physician's office may waive its exemption from licensure as an ambulatory surgery center without waiving its exemption to obtain a CON; and
2. If Kentucky does not have a licensing requirement for physicians' offices operating as an ambulatory surgical center, is licensure by Kentucky a prerequisite to Medicare certification of the office as an ambulatory surgery center?
A beginning point for discussion of all these issues is the difference, if any, between a license and a CON. KRS 216B.015(7) defines a Certificate of Need as:
An authorization by the commission to proceed to acquire, to establish, to offer, to substantially change the bed capacity or to substantially change a health service as covered by this chapter.
unfortunately, KRS 216B.015 failed to provide a definition for a license. Therefore, in accordance with KRS 446.080(4), the term "license" must be construed according to the usual and appropriate usage. A license can be defined as an "official or legal permission to do or own a specified thing." See Webster's II, New Revised University Dictionary, 1984 . This definition is in agreement with the one found in City of Louisville v. Sebree, 308 Ky. 420, 214 S.W.2d 248 (1948), in which the then Court of Appeals stated:
Specifically or technically speaking, to license means to confer on a person the right to do something which otherwise he would not have the right to do -- a special privilege rather than a right common to all persons. It impacts regulation. 214 S.W.2d at 253.
Additional support for this interpretation of the term "license" is contained in 902 KAR 20:101 Section 1(3), which defines a license as:
An authorization issued by the board for the purpose of operating an ambulatory surgical center and offering ambulatory surgical services. (Emphasis added.)
This is also in agreement with the language of KRS 216B.105 which provides:
Unless otherwise provided in this chapter no person shall operate any health facility in the commonwealth without first obtaining a license issued by the cabinet. (Emphasis added.)
Therefore, in this instance, a license must be defined as authorization by CHR to operate a facility while a CON is an authorization from the Commission to establish or initiate a health facility or service. This interpretation is further reinforced by the different statutory provisions found in Chapter 216B in regard to when a CON, as opposed to a license, is required, what state agency issues a license versus a CON and how each authorization may be denied or revoked. Based upon the foregoing, it is the opinion of this office that a license to operate a health facility is separate and distinct from a CON and that the two are not necessarily dependent upon one another for issuance or denial.
Since the two authorizations are separate and independent in nature, it is the opinion of this office that the waiver of exemption from regulation of one of the areas of oversight does not operate to waive exemption from other areas of oversight. In other words, the clinic may waive its exemption from licensure as an ambulatory surgical center without waiving its exemption from having to obtain a CON.
In regard to your second question, it is the opinion of this office that the federal regulation which is referred to in your letter does not require that the clinic be licensed under Chapter 216B. Instead, the pertinent regulation only requires that the center comply with the state licensure requirements. If no such licensure is required under Chapter 216B for any reason, as appears to be the case, then the clinic need not be licensed merely to obtain Medicare reimbursement. This interpretation is consistent with the explanation of the licensure requirement of 42 CFR § 416.40 provided by the Department for Health and Human Services. See Vol. 47 No. 151, Federal Register.
In summary, it is the opinion of this office that:
(1) Since the CON and licensure procedures and requirements are separate and distinct, the waiver of the exemption from licensure would not affect the exemption from CON.
(2) If the clinic is exempt from licensure, under KRS 216B, the federal regulation does not mandate that the clinic obtain a license to operate in order to obtain Medicare reimbursement.