health care

Hospital Exec Pens Plea for Government Protection from Competition

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Institute for Justice / Dr. Mark Monteferrante

If you want to open a new medical office in Virginia, or even just purchase certain types of high-end medical equipment, you have to get permission from the government. The state is one of 36 that requires medical providers to obtain a "Certificate of Need" (CON) in order to perform medical services, and its rules are among the most restrictive in the nation.

Obtaining a certificate of need is a major hassle, and there's no way to predict in advance whether you'll qualify.

As the Institute for Justice, which in 2012 launched a challenge to the state of Virginia's CON law, explains in a backgrounder on its case, first you have to fill out a lengthy application and pay fees that average $20,000. Then a state planning board has to hold a public hearing. After that, you might have to sit through an official fact-finding conference, typically because some existing, already licensed medical provider, has complained about your application. The process typically takes a least six months if there are no hiccups. But it can take a lot longer, and it often does.

Finally, when it's all over, the State Health Commissioner decides if you'll be granted the CON based on a set of 20 factors that essentially exist to provide a pretext for saying "no" if that's what the Commissioner wants. The whole process is arbitrary, expensive, and needlessly burdensome.

You might think that this is the sort of licensing requirement that local health providers would hate. In fact, large incumbent health care players tend to support these rules, because they exist almost entirely to protect existing businesses from new competition.

Those incumbents tend to struggle to justify the rules any other way. An op-ed by Michael McDermott, the CEO of Mary Washington Healthcare, defending Virginia's licensing requirement mostly serves to show how weak the case for the law is. Some of what he argues is beside the point (licensing ensures readiness for disasters), and some of it is more misleading.

McDermott, for example, argues that the requirement is needed to protect the ability of Virginians to "receive access to essential health care services" and ensure "that when we access that health care it is safe, well-regulated and of the highest quality."

But Virginians are actually losing out on access to innovative medical services thanks to the state's Certificate of Need requirement. As the Institute for Justice notes in its backgrounder on the issue, the state, via a Certificate of Need denial, prohibited Dr. Mark Baumel from purchasing new CT scanners with which to perform what's known as an "integrated virtual colonoscopy"—a process that combines a non-invasive virtual screening with an immediate follow-up. The certification rule ended up restricting access, not preserving it.

And according to Robert McNamara, an Institute for Justice Senior Attorney working on the organization's challenge to the rule, there's little evidence suggesting that licensing requirements ease access to care.  

"The vast bulk of the evidence shows that they don't do any good at all," McNamara said in an email. "States like Arizona, California, and Texas (among many others) get by with no medical CON requirements at all—and that anything the state wants to accomplish (whether it's improving access to care or any of the other goals sometimes trotted out to defend these programs) can be accomplished much more directly without a CON requirement."

McDermott's warnings about safety are just as problematic. Baumel's integrated colonoscopy service, for example, is already performed safely elsewhere in the country. Really, the certificate of need awards process has nothing to do with medical safety or oversight; if a CON is granted, health care providers still have to meet all the state medical safety requirements and health professional licensing. This is a separate license just for opening a facility or installing certain new equipment. Indeed, in some cases, the state has denied CONs to providers because other medical facilities nearby already have the same equipment, even if they don't offer the same services, on the theory that those existing providers could offer the new services if they wanted.

Virginia's Certificate of Need requirement isn't about safety. It's not about access. Like so many licensing requirements, it's about protecting incumbents from competition.

So far, sadly, the courts seem willing to let the requirement stand. A federal judge in Virginia ruled in favor of the law last November. An appeal is already in the works, according to McNamara, with opening briefs due in March.

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  1. I grew up in a state that had certificates of need. [SPOILER ALERT] The “need” always correlated perfectly with political clout. [/SPOILER ALERT]

    1. That’s only because political clout is acquired by incumbent providers.

  2. “Certificate of Need” (CON)

    What a perfect acronym.

  3. But I’ve been told repeatedly that we have a free market in health care!

    1. And I’ve been told that it’s the free market that impairs access to health care, especially in less politically economically powerful communities.

    2. The fact that certificates of need aren’t working is proof that the free market in health care has failed.

  4. So if you want certain medical procedures done, will you also nhave to get a certificate of need?

    Death panels are a crazy Republican conspiracy theory!!

  5. Does any town need more than three MRI machines?

    1. I applaud the Institute for Justice for defending our economic freedoms, increasing our prosperity, and reducing the harm government employees/politicians do to us, for their own benefit.

      I recommend them as a charity.

  6. Fond memories:

    I got into the hospital biz working for a trade association in a state that had just passed CON. I thought it was the stupidest thing I had ever seen and convinced the association to work for repeal. Two years later, it was gone.

    Naturally, the tax on hospitals to fund the agency (which has been closed for over 20 years) is still on the books.

  7. my neighbor’s ex-wife makes $62 every hour on the computer . She has been out of work for five months but last month her paycheck was $18411 just working on the computer for a few hours. try this site……..
    ?????? http://www.cashbuzz80.com

  8. “Certificate of Need”?! That’s sounds like something from Atlas Shrugged.

  9. first you have to fill out a lengthy application and pay fees that average $20,000. Then a state planning board has to hold a public hearing. After that, you might have to sit through an official fact-finding conference…The process typically takes a least six months if there are no hiccups. But it can take a lot longer, and it often does.

    Finally, when it’s all over, the State Health Commissioner decides if you’ll be granted the CON based on a set of 20 factors that essentially exist to provide a pretext for saying “no” if that’s what the Commissioner wants.

    All just to open a fucking medical office? But sure, the government wants to make sure that everyone has access to affordable healthcare. They show it by preventing competition. Isn’t that nice of them?

  10. 7 Years ago in Loudoun County there was a big controversy over a planned HCA children’s hospital off the Dulles Greenway in Ashburn that had managed to get a CON from the Commonwealth. The competing hospital system (and major player in the area, INOVA) pitched a fit that it was too close to Loudoun Hospital in Lansdowne and they couldn’t afford competing for patients so close by. So the County forced a horse trade, in which HCA moved to a site on Route 50, will be smaller, and not specialize in pediatrics. It opens this December. Thank goodness I dodged that bullet! Can you imagine how awful it would be to have a children’s hospital so handy in this area chock-full of families?! The horror!

  11. What’s written in the article is true, but carteliz’n is not the primary motivator for these CoN laws. Rather, they’re a type of rationing. Gov’t intervention has increased the quantity of diagnostic procedures demanded, mostly by subsidizing them directly or indirectly, so rationing is necessary to compensate without straining gov’t budgets too much.

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