January 21, 2019

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Reconsideration of Certificate of Need in Virginia

In a joint statement issued by the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice (collectively, the “Agencies”) late last month, the Agencies suggested Virginia’s Certificate of Public Need Work Group (“Work Group”), currently convened, consider repealing or retrenching Virginia’s Certificate of Public Need (“COPN”) law.[1]

Virginia’s COPN program, similar to certificate of need (“CON”) programs in 36 other states and the District of Columbia, requires the State Health Commission, prior to authorizing the initiation of such projects, to determine a public need for certain projects involving general acute care services, perinatal services, diagnostic imaging services, cardiac services, general surgical services, organ transplantation services, medical rehabilitation services, psychiatric/substance abuse services, mental retardation services, lithotripsy services, miscellaneous capital expenditures and nursing facility services.[2] Often the State Health Commission conditions the issuance of a COPN  upon the provision of charity care or services to the medically underserved.[3]  The process of obtaining a COPN can be litigious, costly and time-consuming, resulting in potential delays in initiating health services.

The Agencies make several arguments for the repeal or revision of the current COPN laws such as limiting consumer choice, stifling innovation and creating barriers to innovation. Through the COPN process existing providers may thwart new providers, which may have lower prices, higher quality and/or innovative services, from entering the market and may up drive health care costs. The Agencies point out that the COPN laws may not have controlled health care costs, but rather they may have provided market power to charge higher rates to certain providers.

Advocates of COPN laws may argue that the laws offset the regulatory requirements that hospitals treat patients regardless of their ability to pay.  For instance, teaching hospitals often provide care to the medically underserved, and providers entering into the market may choose high profit services and projects not focused on the needs of the medically underserved. By having the COPN laws, the State Health Commission requires providers entering the market to contribute to the care of the medically underserved and does not leave that responsibility solely to existing providers.

Virginia’s review of its COPN laws may be indicative of a debate on the benefits of CON occurring in various state forums, highlighted by the recent joint statement by the Agencies. The debate is likely to examine whether market forces should determine which providers are in the market given the highly regulated nature of health care.  Moreover, the debate probably will encompass whether existing anti-competitive laws protect the medically underserved without the use of CON laws and whether there is a more targeted means to ensure provision of care to the medically underserved. An objective review of the results of the certificate of public need program in Virginia over the last 42 years may shed some light for legislatures around the country. The Work Group has until December 1st to make its recommendations to Virginia’s Health Secretary.  Stay tuned to how the Work Group and the Virginia General Assembly address the issues raised by the Agencies and other parties.


[1] See full text here: https://www.ftc.gov/policy/policy-actions/advocacy-filings/2015/10/joint-statement-federal-trade-commission-antitrust

[2] http://www.vdh.virginia.gov/OLC/copn/

[3] Code of Virginia § 32.1 – 102.2(C).

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Robert Magielnicki, Legal Specialist, Sheppard Mullin,Antitrust,Trade Regulation
Partner

Robert L. Magielnicki is a partner in the Antitrust and Trade Regulation Practice Group.  He has a multi-disciplinary practice and engages in a diverse commercial practice with emphasis on antitrust, domestic and international business transactions, and complex civil and criminal litigation.

Areas of Practice

Mr. Magielnicki has more than 40 years of experience in the fields of antitrust and trade regulation, and business law, both domestically and internationally, including having served as General Electric Company's Associate Litigation and Antitrust...

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Dawn Crumel, Sheppard Mullin, corporate attorney, medical center lawyer, practical problem-solving legal counsel, physician practice acquisitions law
Special Counsel

Dawn Crumel is a special counsel in the Corporate Practice Group in the firm's Washington, D.C. office, focusing on healthcare issues.

Areas of Practice

Dawn returned to private practice after working for more than 17 years as in-house counsel for academic medical centers and managed care organizations.  She has years of hands on experience as a strategic advisor to health care executives, a deep understanding of the complex issues affecting the health care industry, an instinct for practical problem-solving and the ability to offer go-to advice to in-house counsel.  Dawn is a member of the board of directors of American Health Lawyers Association and the advisory board of the Bloomberg BNA Health Law Reporter. Areas of Dawn’s expertise include:

Acquisitions/Alliances

Dawn has extensive experience with physician practice acquisitions, having negotiated and closed approximately 60 physician practice acquisitions in one year. She has remained active in this practice area throughout her career, representing both hospitals and physician practices. Dawn’s experience also includes selling hospital-owned pharmacies, acquiring nursing homes and hospitals and structuring health system alliances and affiliations.

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