Competition-stifling facility regulations scrutinized nationwide

Based on a partnership with Urology Times, articles from the American Association of Clinical Urologists (AACU) provide updates on legislative processes and issues affecting urologists. We welcome your comments and suggestions. Contact the AACU government affairs office at 847-517-1050 or info@aacuweb.org for more information.

In 1964, New York lawmakers enacted the first state statute granting regulators the power to determine a community's "need" for new hospitals and nursing homes. Ten years later, the federal government stepped in, requiring all 50 states to create an agency to review "capital projects such as building expansions or ordering new high-tech devices," according to the National Conference of State Legislatures.

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Supporters of "certificate of need" (CON) laws argued that limiting new facilities and services would reduce inefficiencies and minimize excess capacity. When the restrictions failed to reduce costs, established providers changed their rationale. They instead argued that the state must limit the growth of specialty hospitals and ambulatory surgery centers to ensure that privately insured patients do not abandon hospital settings, which depend on private payer beneficiaries to make up for losses associated with Medicare and Medicaid reimbursement.

Overwhelmed by insufficient evidence of their usefulness and the tide of Reagan-era deregulation, the federal health facilities planning mandate was repealed in 1987. Within 10 years, 14 states eliminated their certificate of need programs. In the intervening period, most states have tweaked their laws, whether adding new technologies under the CON umbrella or, to loosen the noose, increasing the capital expenditure threshold at which regulators must review a project. But 36 states still impose restrictions in the hope of reducing costs and limiting duplication of services.

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According to the authors of a January 2016 study of CON laws, at least 20 states restrict the technology needed for three highly demanded imaging services: MRI scans, CT scans, and PET scans. In a Jan. 11, 2016 Wall Street Journal editorial, the researchers assert that patients in states with such restrictions have "between 20% and 30% fewer options for providers of these scans than residents of other states. This leads to fewer scans, a drop of between 30% and 65%, depending on the type."

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Given a lack of significant changes to CON laws in the last 15 years, it is noteworthy that many states are currently considering high-profile proposals to reform the process by which health facility and services projects are reviewed.

Campaign accounts of Georgia lawmakers have benefited from a years-long tussle between established hospital systems and upstart specialty hospitals. Most recently, organizations representing Georgia hospitals and nursing homes defeated a bill that would have shelved the state's CON process entirely. A review of campaign finance receipts found that contributors employed by those facilities donated more than $2 million to legislators' war chests over the last 2 years.

South Carolina's CON program has also been under intense scrutiny for more than 2 years. In 2014, Gov. Nikki Haley (R) eliminated funding for the office that enforced the CON law, thereby effectively ending the program. Hospitals successfully challenged that action in court, but Gov. Haley responded by asking the Federal Trade Commission and U.S. Department of Justice to investigate the law. Those agencies recently recommended that South Carolina repeal its CON laws, having concluded the process is anticompetitive and doesn't help control costs or improve the quality of health care. The South Carolina House approved a bill in 2015 that would eliminate the program by 2018, but that measure has since stalled in the state Senate.

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In Florida, health system and nursing home executives are stridently opposed to legislation (HB 437) making its way through the House that that would eliminate the CON altogether. Another proposal in the state Senate (SB 1144) would eliminate the CON, provided the facility demonstrates a "significant, active, and continuing commitment to improved access to care for uninsured and low-income residents…" Likewise, one of at least 15 bills dealing with Virginia's CON program predicates a facility's exemption from the review on the provision of a level of care at a reduced rate to indigents, as well as accepting patients requiring specialized care.

Next: "Virginia lawmakers are considering two other increasingly common changes to the laws regulating health facility and services expansion."

Virginia lawmakers are considering two other increasingly common changes to the laws regulating health facility and services expansion. Health system executive Delegate Chris Stolle, MD, introduced legislation that would exempt diagnostic imaging, as well as radiation and proton beam therapy, services, and equipment from the CON process if an acceptable amount of charity care is provided (HB 1083). A proposal to exempt medical facilities located in rural areas is also under scrutiny in Virginia (HB 349), while a similar measure failed in neighboring North Carolina last year. Broad reform to North Carolina's CON program also failed in 2015, but proponents did secure approval of legislation that allows recently closed facilities to reopen without going through the arduous process.

Similar targeted reforms are being considered across the country. In Iowa, there's a proposal to eliminate CON requirements for radiation therapy equipment valued below $5 million. Clinics and offices of advanced practice registered nurses may soon be exempt in Kansas, while kidney disease treatment centers may be freed from intense scrutiny in Washington. Interestingly, Washington lawmakers are proposing to use the CON law to halt industry consolidation. HB 1870 would prohibit the issuance of a CON for the sale, purchase, or lease of an existing hospital to anyone with an investment interest in any other hospital within the state.

A final example of conventional CON reform is embodied in divergent proposals being considered in Nashville and Boston. After rejecting a bill that would have exempted ambulatory surgery centers and diagnostic imaging services from CON review, the Tennessee legislature is now considering legislation that would increase the amount capital expenditures must exceed before triggering the process. Conversely, lawmakers in Massachusetts have before them a bill to reduce the threshold to $5 million (down from $25 million).

Each of these measures, as well as many more dealing with administrative simplification, physician work force, provider scope of practice, medical liability, and other issues are available for viewing on the AACU website. Please take note of this activity and take action when organizations representing urologists, as well as the patient community, urge you to make your voice heard.

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