Virginia's Hospital Licensing Reform Effort 'Dead For This Year'

Certificate of Public Need laws mean Virginia residents have fewer options and pay more for health care. Hospitals successfully lobbied against reform again.


Ariel Skelley Blend Images/Newscom

Licensing laws that give state bureaucrats control over what medical services can be offered to Virginia residents will stay on the books for at least another year.

Virginia's Certificate of Public Need, or COPN, laws give the state government control over a wide range of medical services in the commonwealth. If a hospital wants to build a new surgical facility, install a new MRI machine, or offer specialty care for sick infants, it first has to get permission from the state Department of Health. Until some minor reforms passed in 2015, hospitals had to get permission from the state just to add additional parking spaces.

These COPN licensing processes are supposed to balance the interests of hospitals with the needs of the public, but in reality they are fraught with politics and allow special interests to effectively veto unwanted competition—as Reason's investigation into the death of an infant at a Roanoke-area hospital found.

For the third consecutive year, state lawmakers in Richmond made an attempt to ease the state's COPN rules and make it easier for hospitals to offer more services without first getting permission from the state.

For the third consecutive year, the effort failed amid of hail of lobbying, led by the Virginia Hospital and Healthcare Association, which represents hospitals and other major healthcare providers.

"Those reforms are dead for this year in Virginia," said state Rep. John O'Bannon, R-Henrico, the sponsor of one of the major reform bills in the legislature. His proposal would have ended COPN licensing for a wide range of medical services—including neo-natal intensive care units, nursing homes, medical imaging centers, and operating rooms—in any part of the state with a population density of more than 200 people per square mile, which would include most of the northern Virginia suburbs, the Tidewater region and the Roanoke-Salem metropolitan area.

The bill cleared one committee vote in the House on January 31 before getting shunted into another committee later the same day. It won't have a chance to escape from that legislative dungeon before the annual session ends on February 25, O'Bannon said, because the state Senate has not agreed to advance their own version of the legislation.

"It's unfortunate for the residents of Virginia, who will continue to be denied access to medical care because of the state's COPN laws," O'Bannon said in a phone interview Tuesday. He said there continues to be a great deal of discussion about COPN laws in the state capital, leaving open the possibility for reform in the 2018 legislative session.

A few weeks ago, Reason published a piece that attempted to demonstrate the real life consequences of Virginia's Certificate of Public Need laws. The story detailed how an infant died at a Roanoke-area hospital in 2012 because the hospital did not have advanced medical technology that might have saved its life, and how the hospital had asked for permission to install that technology a few years earlier, only to be denied by state officials. Those state officials sided with the hospital's chief competitor against the wishes of local government officials, civil leaders, doctors, nurses, and residents of the Roanoke area.

Across the rest of the state and the nation, COPN licensing laws limit access to care and drive up the cost of medical services by limiting the supply of many critical services. More than 30 states have some form of COPN laws (often called Certificate of Need laws in other states) for hospitals, and those states have higher mortality rates for patients with pneumonia, heart failure, and heart attacks than states without such restrictions, according to a study published last year by the Mercatus Center, a free market think tank.

"When CON laws artificially restrict the number of providers in a local market—protecting those few favored providers from increased competition—there is less pressure for them to worry about the quality of care," Mercatus Center researchers Thomas Stratmann and Davild Wille concluded. "Patients are then left with fewer options."

In a separate study from 2015, the Mercatus Center found that there are 131 fewer hospital beds per 100,000 people in Virginia when compared to the rest of the United States. Virginia also has fewer hospitals offering MRI services and CT scans than national averages. Hospital beds, MRI machines, and CT scanners are all subject to COPN licensing in Virginia, which means adding those services can be costly and difficult.

Hospitals favor these restrictions and have lobbied hard to keep them on the books in Virginia.

Julian Walker, vice president of communications for the VHHA, called Virginia's COPN laws "a vital piece of Virginia's health care system."

Any changes to the COPN laws, Walker wrote in an email on Tuesday, "must be part of a comprehensive plan that addresses, among other things, health care coverage and access, hospital payment shortfalls, graduate medical education funding and population health considerations."

Part of the lobbying effort included polling data purporting to show that 59 percent of Virginia resident opposed COPN reforms, even though the question in the poll was slanted pretty hard towards that result.

The COPN reform issue has been tangled up with a proposal from Gov. Terry McAuliffe, a Democrat, to increase taxes on hospitals in order to expand Medicaid coverage, the Hampton Roads Daily Press reported this week.

While hospitals have fought to sink the COPN reforms, lobbying groups representing doctors in the state say changes are needed.

"COPN was established to improve access, control costs, and ensure quality," said the Medical Society of Virginia, in a list of talking points provided to advocates and lawmakers. "By every available measure, COPN has failed to accomplish these objectives."

Doctors and patients would benefit from the erosion of COPN licensing laws, but they'll have to wait until early 2018, at least, before state lawmakers are likely to pick up this issue again.