5 Things To Know About Certificate of Public Need Laws

2021-03-25

– Trump, Obama, and Bush administrations ALL Objected to Certificate of Need Regulation

– System to Control Growth of Health Care Services is Rife with Lobbying Influence

In recent weeks, readers have seen how Sentara Healthcare has used its political capital to stymie competitors from trying to add new services in order to improve their business. One of Sentara’s main weapons has been the exploitation of Virginia’s Certificate of Public Need (COPN) process.

How does it work?

Virginia health care companies must apply to the Virginia health commissioner’s office for COPN approval to add new facilities and treatments, build new hospital units and move services from one location to another. Regional boards review each COPN application, and their recommendations go to the commissioner for approval or rejection. Contested COPN applications are often sent to an adjudication officer, who takes evidence and makes a recommendation to the commissioner.

Why was it created?

When health care costs began to rise in the 1970s, Congress passed National Health Planning and Resources Development Act of 1974. It gave states incentives to pass Certificate of Need laws, and 35 states did so under the theory that if the states determined which hospitals could add certain services, they could prevent hospitals from trying to subsidize a poorly performing unit by raising fees on other services. Hospitals and other providers had to prove to the state that the need for the new services existed. Virginia passed its own COPN law based on the federal authority.

Underlying law was repealed

It didn’t take long for cracks in the certificate of need (“CON”) system to widen into chasms. Many attempts by hospitals to add new services turned into years long fights in court or with government agencies to expand. In 1986, Congress, which then featured a Democratic-controlled House and a Republican Senate, repealed the 1974 law, and Republican President Ronald Reagan signed it. By 1990, 11 states had repealed their laws, including California and Texas — but not Virginia.

Consensus for repeal

At a time when Republican and Democratic administrations rarely agree on anything, the last five have agreed that CON needs to go.

1989, the Republican George H.W. Bush administration’s Federal Trade Commission said: “Almost all the empirical evidence suggests that CON regulation does not help control the costs of health care.”
1997, the Democratic Bill Clinton administration’s Federal Trade Commission said: “We believe that CON regulation is unlikely to benefit health care consumers in Virginia, and we support the complete elimination of CON regulation.”
2008, the Republican George W. Bush administration’s Federal Trade Commission said: “The Commission believes that CON laws such as Florida’s can be a barrier to entry to the detriment of health care competition and health care consumers. Therefore, the Commission generally supports the repeal of such laws.”
2015, the Democratic Barack Obama administration’s Justice Department and FTC told a Virginia work group on COPN: Such laws “appear to have generally failed in their intended purposes of controlling growing health care costs, increasing quality of health care, and ensuring access to care for uninsured and underinsured in urban and rural areas.”
2017, the Republican Donald Trump administration’s Justice Department and FTC said: “CON laws, when first enacted, had the laudable goals of reducing health care costs and improving access to care. However, after considerable experience, it is now apparent that CON laws can prevent the efficient functioning of health care markets in several ways that may undermine those goals.”

An Anticompetitive Weapon

The Justice Department and FTC said in 2017 that well-connected corporations “seeking to thwart or delay entry or expansion by new or existing competitors may use CON laws to achieve that end.” In 2016, Chesapeake Regional Medical Center tried to start a new open-heart surgery center at its hospital in Chesapeake, Va. Sentara protested, and the state health commissioner permitted Sentara to give evidence against CRMC’s application. Sentara has tried to block other applications, and its outside counsel, Jamie Baskerville Martin, proposed changes in the law in 2015 that would have helped Sentara while not publicly revealing her ties to the company.

Sentara’s enablers, such as Virginian-Pilot op-ed writer Gordon Morse, claim despite the existing evidence that Virginia’s COPN system provides more charity care. The multiple FTC opinions over the last five presidential administration show it doesn’t.

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Ray Locker is enterprise and investigative editor of Checks and Balances Project, an investigative watchdog blog holding government officials, lobbyists, and corporate management accountable to the public. Funding for C&BP is provided by Renew American Prosperity and individual donors.