Hospital issues at heart of General Assembly health debates
By Dave Ress, Daily Press
January 6, 2015
A long-simmering notion about hospital regulation, and a shorter-simmering resentment of Gov. Terry McAuliffe’s aggressive push to convince the General Assembly to expand Medicaid with Obamacare dollars, will come to a boil this year.
At the same time an unprecedented offer by state hospitals to kick in some of their money to a new health fund should keep the debate about health care for the uninsured front and center.
In the background is McAuliffe’s bruising, two-year battle to expand Medicare and tap federal Affordable Care Funds to cover more than 350,000 uninsured, low-income Virginians — an effort adamantly opposed by the House of Delegates Republican leadership and almost all Senate Republicans.
Two measures seen as a financial hit on hospitals – ending the state’s Certificate of Public Necessity (COPN) program that free-market advocates say protects medical monopolies, and a new assessment the hospitals themselves proposed as a way to to draw down more federal Medicaid dollars – could be the basis of a health care deal. Or they could simply clear the way for more political posturing.
“We’re getting set for another year of gridlock with even more fireworks,” said Stephen Farnsworth, a political scientist at the University of Mary Washington.
The reason, he said, is that House Republicans see the new assessment that hospitals proposed as part of “McAuliffe’s relentless push for Medicaid expansion,” a push the hospitals have backed aggressively.
“In politics, there’s a saying that the friend of my enemy is my enemy,” Farnsworth said.
McAuliffe has factored the hospital offer into his budget, as an amount of no more than 3 percent of hospital’s revenue from patient payments, and estimated it could save the state nearly $157 million over the next two years. The idea is that using that money for some health care costs would mean a dollar for dollar match from the federal government – and a $9 for $1 match if the state expanded Medicaid.
“I do tilt at windmills, but I don’t think I am going to this session,” said Senate Finance Committee Chairman Emmett Hanger,R. Mount Solon, who was one of three Senate Republicans who tried, unsuccessfully, to find a compromise alternative to Medicaid expansion that would still let the state tap Obamacare funds last year.
If the hospitals’ proposed assessment isn’t be going anywhere, ending the certificate of public necessity program may not either, Hanger believes. Many legislators, including him, have reservations about doing away with the program, he said.
“We have COPN for a reason,” Hanger said. “I know many here share my belief in free markets, but health care is not a free market. It’s not: ‘If you can pay you get care, and if you can’t, you die.’ We don’t do that.”
Even if a bill ending the COPN program were to pass both House and Senate, Farnsworth says, McAuliffe is likely to veto it.
But Olusoji Akomolafe, head of the political science department at Norfolk State University, isn’t so sure either idea is a non-starter.
“It is not unreasonable to assume that a compromise might be in the offing whereby the expansion is rejected as usual but in its stead, Republicans would most likely make provision to increase in some fashion or another the health care budget,” Akomolafe said
“Should that be the case the Republicans’ strategy to gut COPN may turn out to be a smart political move,” he said.
The certificate of public necessity program is based on an obscure state law that says the health commissioner must approve before anyone builds or expands hospitals, outpatient surgery clinics, rehab and nursing facilities or diagnostic imaging services, such as MRIs.
Deep down, the fight over the program is a battle over money.
On one hand, as the House of Delegates’ Republican leadership argues, letting people freely compete for customers – patients, in this case – brings prices down.
On the other, the hospital association says, certificates of necessity keep businesses – including competing hospitals — from cherry-picking the profitable businesses that hospitals rely on to make up for losses on key services such as psychiatric care, obstetrics and charity care. Hospitals say they’re forced to lose money because of federal requirements to provide emergency care and the tendency of Medicare and Medicaid to pay less than the real cost of care.
The COPN issue came to a head last year over a bid by the giant Hospital Corp. of America to build a freestanding emergency care center in New Kent County. To make the idea work, and provide the only such care in the county, HCA argued it needed MRI and CT imaging equipment.
State health department staff said there was no need, since the 36 scanners in health planning district 15 – an 80-mile-long swath of central Virginia stretching from Goochland to New Kent Counties — weren’t busy enough.
The state health commissioner later gave a green light to the project – but the whole process bugged Del. Chris Peace, R-Hanover, who represents the county.
“Far too often, local communities are denied increased access to basic services such as outpatient emergency rooms, CT scanners or MRIs by healthcare regulators based on decisions made by unelected bureaucrats,” he said.
Virginia is one of 36 states that have some form of a certificate of need requirement.
The idea is to prevent hospitals and clinics from building more facilities than are needed, on the theory that the cost of unused beds and equipment would have to be covered by increasing charges actual patients must pay.
But the effect is to reduce competition, argues Del. John O’Bannon, R-Henrico, the House GOP’s point man on health policy.
That is because two criteria the state health commissioner must consider before issuing a certificate of public necessity include the availability of other facilities nearby and the impact on the use and efficiency of existing facilities.
The debate has brought big money into play: hospitals gave a total of $684,400 to legislative candidates in the latest election cycle.
The hospital association itself gave $301,000 while the for-profit Hospital Corp. of America separately gave $251,000.
The association believes the certificate of public necessity requirement should remain intact, although it supports recommendations to streamline the process itself..
But one of HCA’s lobbyists, Tyler Bishop, told a state Health Department task force on the issue last fall that the COPN process “should not be held as sacred” and that reform would do little if the result was to “continue to restrict access to care.”
In last year’s Florida battle on the issue, HCA’s 22 lobbyists argued that certificate of need regulations hindered its operations.
Lobbyists say other differences could also be a factor – health systems like Northern Virginia’s Inova or Norfolk-based Sentara that have in-house insurance arms and statewide ambitions might like the idea of more competition, at least outside their home turfs. Smaller hospitals already facing competitive pressures tend to be firm supporters of the system. Doctors and clinics interested in setting up MRIs or CT scans, which can be very profitable, are inclinded to oppose the system.
But Bishop believes it needs to be retained, to ensure that the right facilities are built in the right places.
Both Inova and Sentara are financial powerhouses – each reported net income exceeding $145 million in their most recent filings with the Internal Revenue Service, for 2013. Inova’s net worth was $1.9 billion; Sentara’s $980 million. Newport News-based Riverside Healthcare didn’t fare as well: its expenses exceeded revenue by $4 million that year, while its net worth was $581 million, its IRS filing showed.
Republicans over the past two years regularly cited hospital profits as an indication that hospitals were overstating the impact of charity and money-losing care they provided when arguing Medicaid expansion would ease that financial strain. Hospitals say their net income reflects prudent management, accumulating resources they’ll need to improve service in years to come.
Also complicating hospitals’ position is that House Republicans are proposing a range of reforms, from repealing only requirements for CT-scan and MRI facilities, to an immediate repeal of all certificate requirements except for rural hospitals and nursing homes. Nursing home companies and employees gave nearly $395,000 to candidates in the last election cycle.
Some hospitals might be able to live with some change to certificate of necessity regulation, while there could be a range of views on whether compromise now would avoid a complete elimination of the program, lobbyists say.
“I do think there’s a range of opinion,” said Alan Witt, chairman of Riverside Healthcare. But, he added, “from my perspective, and from Riverside’s, there’s a belief that the process needs to be streamlined.”
And, he said, he’s not comfortable with the idea of going along with ending the certificate of need requirement for particular types of facilities or equipment.
“There’s a question of if you do, where does it stop,” he said.
Asked about potential differences within the hospital association, Julian Walker, vice president of the hospital association, said the group’s position should remain intact as a result of an in-depth review by member hospitals.
“Virginia hospitals and healthcare systems are well versed in COPN – how the process works and applies to them,” Walker said.
That review’s conclusion, that the certificate of necessity program should be kept, though streamlined, was the same position reached by a task force of hospitals, health plans and businesses convened by the state Health Department to study the issue, he said.
