Government

Certificate-of-need law in Illinois slammed by feds, AMA

Doctors and hospitals continue to battle over the effectiveness of such laws in dozens of states.

By — Posted Oct. 6, 2008

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Illinois' certificate-of-need law and similar statutes in other states undercut consumer choice, stifle innovation and generally have failed to keep health care costs down, according to a joint statement by the Federal Trade Commission and Dept. of Justice.

The federal antitrust agencies reiterated these long-held positions at a Sept. 15 hearing before the Illinois Task Force on Health Planning Reform, commissioned by the Legislature last year to evaluate the state's law. The report -- which echoed the findings of a 2004 Justice Dept. study -- came after at least 14 states amended certificate-of-need laws earlier this year in the face of ongoing debates over whether such programs work as intended, according to the National Conference of State Legislatures.

Thirty-six states and Washington, D.C., have CON laws, which require physicians and hospitals to demonstrate a community need for new projects and services before receiving state approval to offer them.

"There really is a role for competition in health care delivery that can be quite important for consumers, not just in controlling certain areas of price growth but in all sorts of quality competition in terms of what is available where and to whom," said Daniel J. Gilman, an attorney and adviser in the FTC's Office of Policy Planning.

Task force members will take the joint statement into account when advising state lawmakers on the future of the statute.

The American Medical Association has long opposed certificate-of-need restrictions, and the Illinois State Medical Society has advocated repealing the state law. The Association provided testimony to the Illinois task force in April echoing the government's stance that little evidence exists to suggest CON regulations effectively rein in health care costs or promote access to care.

The AMA and the government report pointed to a recent growth in specialty hospitals, ambulatory surgery centers and other physician-owned facilities that has brought convenience, lower costs and better technology to patients while spurring hospitals to improve their services.

"With competition, hospitals are going to have to make changes to make sure they take care of patients better, whereas if they have a monopoly, they don't care as much," said Gordon Lang, MD, a Chicago-area nephrologist who testified before the task force. "We have to look at how to best take care of patients. We're not here to make sure these companies continue to make a profit."

After spending roughly $80,000 going through the certificate-of-need process in 2004, Dr. Lang was defeated in his effort to open a dialysis center in St. Charles after the major local hospital successfully argued it had open capacity. Still, many vulnerable dialysis patients had to drive at least 30 minutes to get to the hospital, Dr. Lang said. Once there, they often faced long wait times for treatment.

The FTC's Gilman noted that the CON process raised the potential for antitrust abuses. The federal report cited enforcement actions against hospitals for allegedly delaying the process intentionally, driving up expenses with their objections or colluding to prevent outside competition.

Hospitals disagree

But hospitals rejected the government's conclusions.

Traditional competition principles do not apply to health care because it is a government-regulated industry in which Medicare and Medicaid fail to pay the full cost of care, said Howard Peters, the Illinois Hospital Assn.'s senior vice president of government relations. His organization testified in favor of keeping the CON law but supports reforms to simplify the process.

Without the CON process to weed out unnecessary duplication, "profiteers can come in and cherry-pick by engaging in only those services where people can pay" using private insurance, he said. That leaves community hospitals with the burden of covering indigent and uncompensated care, and it can undercut hospitals' ability to subsidize emergency or charity services, he added.

Dr. Lang said physician owners continue to provide their fair share of charity care.

Reform or repeal

The Illinois Task Force on Health Planning Reform is expected to submit its recommendations on the CON program to the Illinois Legislature in November.

"If we can't reform the circumstances surrounding certificate-of-need, we need to abolish it," said Sen. Bill Brady, a Republican member of the commission. "The [process] can't be there to maintain a monopoly" over providing health care services.

Brady suggested changes that would reduce the health care services or projects currently subject to the CON process, account for factors such as patient transportation time and require the review board to show the potential adverse effects of a particular proposal before rejecting it. He also recommended including members from the hospital and physician communities on the board.

The Ambulatory Surgery Center Assn. of Illinois supports similar reforms for what it deems one of the most stringent CON statutes in the country. "We're coming from the political reality that if there is going to be a system, it needs to be improved," said Mark Mayo, the organization's executive director.

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ADDITIONAL INFORMATION

CON laws

Some 36 states have certificate-of-need laws with varying scopes. Since the beginning of this year, nearly half of these states amended their statutes in the face of debate over whether CON programs contain health care costs as intended.

States with CON laws: Alabama, Alaska, Arkansas, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, Washington, D.C., West Virginia, Wisconsin

States that amended CON programs in 2008: Connecticut, Florida, Georgia, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nebraska, New Hampshire, Rhode Island, Tennessee, Vermont, Virginia, Washington, D.C.

Sources: American Medical Association, National Conference of State Legislatures

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