Questioning legality of CON laws
Providers going to court over state CON laws
Laws forcing healthcare providers to get state permission before entering new markets have never lacked for critics, but attorneys opposing the laws have recently seized upon a new legal theory that says the requirements may violate the Constitution.
In Yakima, Wash., a hospital that is challenging a 2008 expansion of the state’s certificate-of-need law for elective nonsurgical heart procedures is heading to federal appeals court for the second time in two years. That follows a ruling from the same court last year that undercut the state’s argument that a federal statute repealed in 1986 provided clear congressional authorization for CON laws.
Meanwhile in Virginia, two physician groups that want to buy regulated medical-imaging equipment are awaiting a critical pre-trial ruling from a U.S. District Court judge. That lawsuit is explicitly intended as an attack on Virginia’s CON law and the constitutionality of state control of healthcare capacity in the U.S.
“States don’t have the right to violate the Constitution. They don’t have the right to violate the commerce clause, and they don’t have the right to violate the 14th Amendment,” said Robert McNamara, staff attorney with the libertarian law firm the Institute for Justice, which is representing the doctors in the Virginia case. “Patients and doctors and hospitals ought to determine what medical services are needed, not the government.”
State officials say they’re protecting con- sumers by preventing the construction of unneeded healthcare facilities and the purchases of excess medical equipment whose costs get passed on to patients as higher prices and unnecessary medical procedures. Proponents also say concentrating procedures into higher-volume facilities benefits patient safety.
“We believe that our rules are appropriate for the state of Washington,” said Janis Sigman, program manager of Washington’s Certificate of Need Program.
CON laws have faced criticisms that they protect local monopolies ever since state-based authorities were mandated by the National Health Planning and Resources Development Act in 1974. That law was repealed in 1986 over concerns about its effectiveness, but at least 36 states still retain varying levels of control over healthcare capacity, according to a 2012 survey by the National Conference of State Legislatures.
Legal experts say the recent constitutional arguments are a new phenomenon, pitting a state’s right to regulate citizens against an individual’s right to be free from excessive regulation.
The recent legal theories on unconstitutionality say CON laws violate Congress’ exclusive right under the commerce clause to regulate interstate commerce, since hospitals and medical practices would purchase goods and attract patients and doctors across state lines. The Virginia litigants also allege providers’ 14th Amendment rights to equal protection under the laws are infringed by CON requirements.
James Blumstein, a professor of health and constitutional law at Vanderbilt Law School in Nashville, said those lines of reasoning are likely to face an uphill battle in court. Though he’s skeptical that CON laws accomplish their stated goals, that’s different from saying the law could be thrown out under a commerce clause argument.
That’s particularly true for the case in Washington— Yakima Valley Memorial Hospital v.
Washington State Department of Health— in which the 9th U.S. Circuit Court of Appeals judges in Seattle have ruled that the hospital’s argument must pass what’s known as the Pike test, named after the plaintiff in a 1970 U.S. Supreme Court ruling on the commerce clause.
“The burden of proof in a Pike case is on the plaintiffs, the challengers, to show that the harm to commerce is clearly excessive,” Blumstein said. “The only way that the challengers can win on this is to show that the benefits (of the CON) are trivial and the harm is extraordinary.”
James Phillips, the Miller Nash attorney in Seattle representing Yakima Valley Memorial, noted that a U.S. District Court has twice ruled against his clients on pre-trial motions, which means he’s never been able to have a full trial in which to present his evidence that the harm of the law has been extraordinary compared with purported benefits he called “illusory.”
“It is proven that CON statutes don’t control costs and increase access,” he said. “That’s why the federal law was repealed.”
The Federal Trade Commission has opposed some CON laws through public statements filed with legislatures in states such as Florida and Alaska, according to written comments from the commission. In an extensive 2004 study, the FTC and Justice Department concluded that strong competition benefits healthcare consumers in many cases.
“Vigorous competition can be quite unpleasant for competitors, however,” according to the report. “Indeed, competition can be ruthless— a circumstance that can create cognitive dissonance for providers who prefer to focus on the necessity for trust and the importance of compassion in the delivery of healthcare services.”
However, the American Health Planning Association cites statistics in a 2002 study in the Journal of the American Medical Association that found higher mortality for heart-bypass surgery patients in states without CON laws. Study authors said it was likely related to the fact that the per-hospital volumes of the procedures were lower in states without the laws.
“These findings suggest that repeal of certificate-of-need regulations may have adverse effects on patient outcomes and may promote the development of low-volume surgical programs,” the article said.