Michigan court refuses to hear certificate-of-need appeal

Two controversial hospital expansion projects in suburbs near Detroit scored a major victory when the Michigan Supreme Court declined to hear a lawsuit that claimed the projects unfairly skirted the state's certificate-of-need process.

On Sept. 1, the court announced that it refused to hear an appeal in a lawsuit that sought to stop Henry Ford Health System and St. John Health from moving forward with plans to build or expand hospitals in nearby Oakland County.

St. John Chief Executive Elliot Joseph hailed the decision as a victory for patients "because it reaffirms our position that there is a definite need for access to inpatient medical care in the rapidly growing western suburbs," he said in a written statement.

Five other hospitals -- three of which have operations in Oakland County -- had sued, challenging the constitutionality of portions of a law state legislators passed that allowed Detroit-based health systems to, under certain criteria, transfer beds from existing facilities to the new projects. That meant they could bypass the certificate-of-need regulatory approval process for building.

The lawsuit drew the support of Detroit's big businesses -- including the Big Three automakers -- who objected that the legislative exemptions set an unfair precedent and could translate into wasteful spending of health dollars.

A lower court judge ruled in 2004 that the plaintiffs didn't have legal standing to intervene, and an appeals court upheld the ruling.

An attorney for the plaintiffs did not return phone messages. But most observers agree that the Supreme Court's decision effectively ends the legal challenge to the projects and what has been a divisive issue for Michigan hospitals.

"My sense is that [the plaintiffs] are unhappy about it but they are moving on," said Amy Barkholz, senior director of advocacy for the Michigan Health & Hospital Assn.

Barkholz said most Michigan hospitals support the state's certificate-of-need law, which requires hospitals to prove a need for more beds in an area before new construction is approved. But the unique circumstances involving these particular proposals called into question whether the methodology for determining a need for more beds was working.

"CON is always going to have winners and losers, and it's always going to have to make red-line decisions when there are areas of gray," she said.

Though many states have done away with certificate-of-need laws, they still exist in varying degrees in several areas.

Vinod Sahney, PhD, senior vice president of Henry Ford, hopes the health system's long battle to build in Oakland County may be over.

"It is quite a relief. It was an unnecessary thing but we had to go through it," he said. "We've been trying to build for 20 years, and the population has just grown and grown and grown."

Henry Ford has proposed building a 300-bed hospital in West Bloomfield, Mich., transferring about 250 beds from its downtown hospital and 50 from another suburban site. Construction, which is projected to cost $300 million, was expected to begin by the end of September.

Dr. Sahney said the health system has more capacity than it needs at its 910-bed downtown facility, and needs to follow the growing population in the western suburbs. Also, moving to an affluent area will help the system, which serves a poorer patient base in its urban settings, make ends meet.

"Our solution was you need to give us access to more affluent markets so we can balance our payer mix," he said.

Already there are close to 200 physicians employed in six satellite facilities near where Henry Ford's new hospital is being built, Dr. Sahney said. He estimated that the health system would probably try to add 200 more after opening.

St. John has proposed a $224 million, 200-bed hospital in Novi, Mich. It will transfer beds from three of its other facilities. Road construction has already begun at the site, and groundbreaking is expected in October.