Ques­tion­ing le­gal­ity of CON laws

Providers go­ing to court over state CON laws

Modern Healthcare - - FRONT PAGE - Joe Carl­son

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.

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