ONCE again, bills to limit or even repeal Virginia’s Certificate of Public Need program have been introduced in the Virginia General Assembly. Although previous attempts failed in the past few years, it might be time for lawmakers to reconsider.
In 1974, Congress passed the National Health Planning and Resources Development Act, which withheld funding from states that did not require health care providers that wished to open a new facility or expand an existing one to prove that the community needed the new service. The law’s intent was to reduce health care costs by limiting oversupply in some areas and undersupply in others.
The federal law was repealed in 1987 because it failed to reduce health care costs. But many states, including Virginia, retained their state-level programs, which regulate not only the number of hospital and nursing home beds, but also the number of free-standing ambulatory surgical, medical imaging, rehabilitation and psychiatric care facilities.
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Beyond proving a need for new beds or equipment, applicants for a COPN may also be required to meet certain other conditions, including providing primary care to indigents and persons with special needs at a reduced rate, especially in medically underserved areas, according to the Virginia Department of Public Health.
A bill (HB1680) introduced by Del. Bobby Orrock, R–Spotsylvania, would create “a three-phase process to sunset certificate of public need requirements for many categories of medical care facilities and projects,” including imaging services such as MRIs, ambulatory and outpatient surgery centers. Another bill (SB1361) introduced by Sen. Frank Wagner, R-Virginia Beach, would repeal Virginia’s COPN program altogether.
Proponents say COPN is necessary to keep full-service hospitals, which are required to offer charity care, financially viable by restricting access to facilities that offer only the most profitable services. In addition, consolidating surgical procedures at high-volume hospitals ensures better outcomes for patients because medical personnel there have more experience performing these procedures.
On the other hand, physician groups and owners of ambulatory surgical centers say that without the COPN, they could offer equal quality care at more convenient locations for less cost.
Matthew Mitchell, director of the Equity Initiative at George Mason University’s Mercatus Center, compared Virginia with Ohio, which regulates only nursing home and long-term-care beds, and Pennsylvania, which repealed its COPN law in 1996.
Because it has a higher per-capita income and a lower poverty rate than the other two states, Virginia arguably should have had more medical facilities in rural areas than either Ohio or Pennsylvania. But, Mitchell told legislators last April, the opposite was true.
“On a per-resident basis, Virginia now has seven-tenths as many hospitals as Pennsylvania and a little more than six-tenths as many as Ohio,” he said, pointing out that, “Virginia not only has fewer rural hospitals per rural resident than either of the other two states; it is the only one of the three that has seen a decline [34 percent] in that figure over time.”
And while the number of ambulatory surgical centers increased dramatically in Ohio and Pennsylvania, Virginia saw considerably less growth of these facilities, especially in rural areas.
“Unfortunately, by limiting supply and undermining competition, COPN laws may undercut each of the laudable aims that policymakers desire to achieve. ... In fact, research shows that COPN laws fail to achieve the goals most often given when enacting such laws,” Mitchell added. “While these regulations appear to benefit incumbent providers by limiting their competition, their effects on patients and taxpayers have generally been found to be negative.”
Another Mercatus study in 2015 estimated that Virginia would have 49 more health care facilities, including 13 additional rural hospitals, if its COPN had been repealed.
“These programs intend to create quid pro quo arrangements: state governments restrict competition, increasing the cost of health care for some, and in return medical providers use these contrived profits to increase the care they provide to the poor. However, these claimed benefits have failed to materialize as intended,” the study concluded. Researchers found “no relationship between certificates of need and the level of charity care.”
In fact, states that do not have any COPN regulations, like Pennsylvania, have similar rates of charity care compared with states like Virginia.
And even with COPN, two financially distressed rural hospitals in Virginia closed anyway: Lee Regional Medical Center in Pennington Gap and Pioneer Community Hospital of Patrick in Stuart. So maybe it’s time to take another look at Virginia’s 46-year-old COPN to see if it’s working as intended.