In a joint statement issued by the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice (collectively, the “Agencies”) late last month, the Agencies suggested Virginia’s Certificate of Public Need Work Group (“Work Group”), currently convened, consider repealing or retrenching Virginia’s Certificate of Public Need (“COPN”) law.
Virginia’s COPN program, similar to certificate of need (“CON”) programs in 36 other states and the District of Columbia, requires the State Health Commission, prior to authorizing the initiation of such projects, to determine a public need for certain projects involving general acute care services, perinatal services, diagnostic imaging services, cardiac services, general surgical services, organ transplantation services, medical rehabilitation services, psychiatric/substance abuse services, mental retardation services, lithotripsy services, miscellaneous capital expenditures and nursing facility services. Often the State Health Commission conditions the issuance of a COPN upon the provision of charity care or services to the medically underserved. The process of obtaining a COPN can be litigious, costly and time-consuming, resulting in potential delays in initiating health services.
The Agencies make several arguments for the repeal or revision of the current COPN laws such as limiting consumer choice, stifling innovation and creating barriers to innovation. Through the COPN process existing providers may thwart new providers, which may have lower prices, higher quality and/or innovative services, from entering the market and may up drive health care costs. The Agencies point out that the COPN laws may not have controlled health care costs, but rather they may have provided market power to charge higher rates to certain providers.
Advocates of COPN laws may argue that the laws offset the regulatory requirements that hospitals treat patients regardless of their ability to pay. For instance, teaching hospitals often provide care to the medically underserved, and providers entering into the market may choose high profit services and projects not focused on the needs of the medically underserved. By having the COPN laws, the State Health Commission requires providers entering the market to contribute to the care of the medically underserved and does not leave that responsibility solely to existing providers.
Virginia’s review of its COPN laws may be indicative of a debate on the benefits of CON occurring in various state forums, highlighted by the recent joint statement by the Agencies. The debate is likely to examine whether market forces should determine which providers are in the market given the highly regulated nature of health care. Moreover, the debate probably will encompass whether existing anti-competitive laws protect the medically underserved without the use of CON laws and whether there is a more targeted means to ensure provision of care to the medically underserved. An objective review of the results of the certificate of public need program in Virginia over the last 42 years may shed some light for legislatures around the country. The Work Group has until December 1st to make its recommendations to Virginia’s Health Secretary. Stay tuned to how the Work Group and the Virginia General Assembly address the issues raised by the Agencies and other parties.