Doctors appeal ruling dismissing certificate-of-need challenge

They say they are undaunted after a federal judge tossed their lawsuit against Virginia’s CON program.

By Alicia Gallegos — Posted Oct. 15, 2012

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A group of physicians will appeal a court decision throwing out a constitutional challenge of Virginia’s certificate-of-need mandate. The U.S. District Court for the Eastern District of Virginia on Sept. 14 dismissed the doctors’ lawsuit, ruling that the plaintiffs’ claims had no merit.

The physicians are not discouraged by the decision and are confident that they will prevail in a higher court, said Robert McNamara, an attorney for the Institute for Justice. The libertarian civil rights law firm, based in Arlington, Va., sued the state on the doctors’ behalf.

“It is important to appeal this case, because what the lower court did was completely wrong,” McNamara said. “This case is about vindicating the right to earn an honest living, not just for our clients, but for doctors and entrepreneurs nationwide.”

A spokeswoman for Virginia Gov. Robert McDonnell referred questions about the case to Virginia Secretary of Health and Human Services Bill Hazel. At this article’s deadline, messages left with Hazel’s office had not been returned.

The state’s 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 projects. No certificate is issued unless the state determines a public need for the project, service or equipment.

Several doctors, including a neuroradiologist and a Pennsylvania internist, sued over the requirement in June. The plaintiffs claim that the mandate amounts to economic protectionism for favored in-state businesses and violates the commerce clause of the U.S. Constitution, which requires that states allow free trade.

The state requested that the suit be dismissed, arguing that Virginia’s CON program does not violate due process or equal protection guarantees. The plaintiffs have failed to prove that the mandate discriminates against nonresident health professionals or is anti-competitive, the state said.

The court agreed with Virginia. U.S. District Judge Claude M. Hilton noted that in 2011, the state accepted 45 of 53 applications for certificates of need, approving total expenditures of $730 million. The state denied proposed expenditures of $44 million.

Concerns about CON mandates

At least 35 states have similar versions of the certificate-of-need program, but their requirements and criteria differ.

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

The Medical Society of Virginia supports the deregulation of the state’s CON program. The medical society is not involved in the federal lawsuit but is monitoring the case. The society has battled for less-stringent CON regulations in the Legislature to no avail, said Michael Jurgensen, the group’s senior vice president for health policy.

“We think it’s appropriate that physicians have the opportunity to innovate, either with bringing in new equipment or looking to establish facilities that would offer a broader range of services, [without] having to go through the certificate-of-need program,” he said.

Physicians in nearby West Virginia also would welcome a court ruling that could be used to reduce their state’s CON regulations. West Virginia has one of the most restrictive certificate-of-need laws in the country, said Evan Jenkins, executive director of the West Virginia State Medical Assn.

The medical society has long argued “that West Virginia is out of step because of our restrictive environment, and that we should become more like other states that have done away with or reduced their certificate-of-need oversight,” he said. “If there was a federal court decision that clearly ruled unconstitutional certain state CON laws, I would suspect West Virginia and every other state that has CON laws would have to take notice of the outcome.”

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Case at a glance

Is Virginia’s certificate-of-need mandate constitutional?

The U.S. District Court for the Eastern District of Virginia declined to answer the question. The court said the plaintiffs failed to prove that their equal protection and commerce clause claims had merit. The court granted the state’s request to dismiss the legal challenge.

Impact: The ruling leaves intact the state’s CON requirements, which some physicians say prevent doctors from bringing needed new services and equipment to Virginia and harm access to care for patients.

Colon Health Centers of America LLC. v. Bill Hazel et al., U.S. District Court for the Eastern District of Virginia, Sept. 14

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