Physicians sue over long-standing certificate-of-need mandate

Doctors say the 30-year-old Virginia requirement, which compels them to obtain permission before expanding medical services, violates constitutional rights. A decision could affect laws elsewhere.

By Alicia Gallegos — Posted June 25, 2012

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Neuroradiologist Mark Monteferrante, MD, knew that his medical imaging practice would need to obtain permission before it could add a second MRI unit to its Northern Virginia office. The state’s certificate-of-need mandate requires that health professionals first prove that any planned new service or equipment is necessary to meet community health needs. However, he had no idea that his application for a new machine would turn into a five-year quest that would cost $175,000 in filing fees, consultant bills and attorneys expenses.

“To a certain point, you almost give up. You’re basically hamstrung at every turn,” said Dr. Monteferrante, whose radiology practice primarily is based out of state. “It was very burdensome, very expensive and time-consuming.”

Dr. Monteferrante is not alone in his frustration with the Virginia CON requirement. He is one of several physicians now suing the state over the program’s constitutionality. The doctors say the mandate is anti-competitive and biased against businesses attempting to enter the state or those with out-of-state ties, and that it keeps needed new medical services from reaching patients. The state has maintained that the requirement controls health spending and prevents unnecessary duplication of services and equipment.

“The program seeks to contain health care costs while ensuring financial viability and access to health care for all Virginia at a reasonable cost,” the Virginia Dept. of Health states on its website.

The CON program, which has been operating for more than 30 years, requires owners and sponsors of medical facility projects to secure permission from the state health commissioner before initiating the projects. No certificate is issued unless the state determines a public need for the project or service. The information required from applicants includes: a relationship of the project to the long-term health care state plan; the need for enhanced facilities to serve the population of an area; and the extent to which the project is accessible to all residents in the proposed area.

The doctors’ lawsuit, filed June 5 in the U.S. District Court for the Eastern District of Virginia, claims that the requirement amounts to economic protectionism for favored in-state businesses. They said the mandate violates the commerce clause of the U.S. Constitution, which requires that states allow free trade, said Robert McNamara, an attorney with the Institute for Justice. The libertarian civil rights law firm based in Arlington, Va., is suing the state on the doctors’ behalf. The program also is violating the 14th Amendment as it relates to equal protection and due process under the law, McNamara said.

“The manner in which Virginia is applying its CON program is completely irrational and violates economic liberty and the rights of people to earn an honest living free from government interference,” he said.

At this article’s deadline, messages and emails left with the Virginia Dept. of Health had not been returned. Messages and emails also had not been returned by the Virginia Secretary of Health and Human Resources.

On its website, the Virginia Dept. of Health says the CON program uses a structured batching process to provide an orderly process for resolving questions about the need to create new facilities or services, or expand existing ones. The application process and project review can take six to seven months, the department said.

Pennsylvania internist Mark Baumel, MD, is also part of Dr. Monteferrante’s suit. Dr. Baumel had hoped to bring a new colonoscopy imaging service to Virginia but was prevented by the CON program, according to the complaint. The system, called integrated virtual colonoscopy, is being used by Dr. Baumel in Delaware, and he also has plans to expand to New Jersey.

As with the other new services being denied by the state, keeping the new colonoscopy technology out of Virginia harms patients, McNamara said. “It means dramatically reduced access to care.”

Virginia CON mandate one of many

At least 35 states have similar versions of the certificate-of-need program, but their requirements and criteria differ. In Oregon, for example, certificates of need are required only if a proposal’s sponsor is opening a full-service hospital or nursing home.

Until 1986, all states were required by the federal government to have CON programs to receive federal Medicaid funding. When the mandate was repealed, 13 states did away with their mandates.

If the court strikes down Virginia’s program, the ruling could have nationwide implications in states with similar programs, McNamara said.

American Medical Association policy says there is little evidence to suggest that certificate-of-need programs effectively restrain health care costs or limit capital investment. The Association therefore opposes the extension of such requirements to private physicians’ offices.

In 2004, a joint report by the Federal Trade Commission and the Dept. of Justice recommended that states reconsider the value of CON programs, calling into question whether they save the system in health care costs. “The agencies believe that, on balance, CON programs are not successful in containing health care costs, and that they pose serious anti-competitive risks that usually outweigh their purported economic benefits,” the report said. “Market incumbents can too easily use CON procedures to forestall competitors from entering an incumbent’s market.”

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