ATLANTA — A state Senate committee narrowly approved legislation late Tuesday that would replace Georgia’s certificate of need (CON) law governing hospitals with a less restrictive “special health-care service” license.

The original version of Senate Bill 162 introduced last week called for a complete repeal of CON, a move legislative Republicans and conservative public policy organizations have advocated for years but that has been opposed by hospital groups. The CON law, which the General Assembly passed back in 1979, requires applicants wishing to build a new hospital or provide a new medical service to demonstrate a need for it in their community.

Representatives of Georgia hospitals have long argued that getting rid of CON would allow physician owners of ambulatory surgery centers to open for business near existing full-service hospitals and siphon away paying patients. Under federal law, full-service hospitals must treat every patient regardless of ability to pay.

A new version of Senate Bill 162 presented to the Senate Regulated Industries Committee Tuesday is aimed at removing that argument by ensuring that Georgia hospitals with the highest concentration of Medicaid patients and patients without health insurance no longer have to shoulder the financial burden of uncompensated care.

The bill would establish a “direct payment plan” without using state dollars to cover uncompensated care provided by Grady Memorial Hospital in Atlanta and the Medical College of Georgia in Augusta, the state’s 21 research hospitals, and Georgia’s 61 rural hospitals, said Sen. Ben Watson, R-Savannah, the legislation’s chief sponsor.

“This takes care of the Medicaid patients and all the ones who don’t have insurance,” he said. “With this windfall … there’s going to be significant money.”

The bill’s supporters called it a fundamental change in the economics of hospitals in Georgia.

“CON is an outdated law,” said Jesse Weathington, president of the Georgia Association of Health Plans. “It was sold as a cost saving metric. It has failed. This bill is transformative.”

Representatives of groups that have long defended the CON law expressed some concerns with Watson’s bill but said it warrants further study.

“We support CON,” said Monty Veazey, president and CEO of the Georgia Alliance of Community Hospitals. “However, we are willing to come to the table and have discussions.”

Watson’s bill squeaked through the committee by a single vote, with Sen. Bill Cowsert, R-Athens, the panel’s chairman, providing the winning margin. It now heads to the Senate Rules Committee, which will decide when and if to bring it to the Senate floor.

This story comes to GPB through a reporting partnership with Capitol Beat.