As the nation's purchasers of healthcare services look for ways to control their escalating healthcare costs, health planning through the certificate-of-need process is getting renewed attention. Don't bother. In fact, all state CON laws should be repealed. Purchasers stand a better chance of lowering their healthcare bills with wide-open competition among providers for facilities and services.
State CON laws have been a complete failure-the decision to build a new facility or open a new service depends on everything but community need. Ironically, that's exactly what's supposed to determine whether a CON application is granted. Will the project serve an unmet community need? Will the project duplicate existing services? Will the project increase costs? All are common criteria in any state CON law.
But as any healthcare executive who has gone through the CON process will tell you, the final decision on whether a project is given the green light depends largely on another set of unwritten criteria. Which state lawmakers or administrators do you know? How much money do you have? How persuasive are your lawyers? How creative are your consultants? How much time do you have? Are you willing to compromise?
A healthcare provider with a monopoly over a certain type of facility or service will fight to the death to preserve its franchise. It will vehemently oppose any CON application allowing a competitor into its market, even if that competitor can offer the same product for a lower price. Conversely, a provider that wants to offer a competing product in a potentially lucrative new market will pull out all the stops to make sure its project gets the go-ahead over the objections of the incumbent providers. Who wins in these scenarios depends on the unwritten criteria.
Given that, let's handicap two CON disputes that Modern Healthcare has been following in recent weeks:
* HealthSouth Corp. is building a $240 million hospital in its hometown of Birmingham, Ala. Led by flamboyant Chairman and Chief Executive Officer Richard Scrushy, the company successfully lobbied the Alabama Legislature for an exemption from the state's CON program to build the facility, which the company has hailed as the first "all-digital" hospital of the future. Last month, two local competitors-Baptist Health System and Brookwood Health Services, both in Birmingham, sued the state, saying the CON exemption law passed by the state Legislature was unconstitutional (May 20, p. 6). Sorry, guys-this one goes to Scrushy and HealthSouth. Even if you win in state trial court, HealthSouth will appeal. The best you can hope for is a court order sending the project back to be reviewed by the state Health Planning and Development Agency. Guess how that will go. The for-profit rehabilitation giant owns Birmingham and the state of Alabama. This is Scrushy's home turf. Besides, the company already has broken ground on the new hospital. No one is throwing dirt back into that hole.
* The second dispute also has ended up in state court. Wellmont Health System in Kingsport, Tenn., wants to build a $56 million hospital in Johnson City, Tenn. Mountain States Health Alliance, which operates the largest hospital in Johnson City, opposes the project. Wellmont got CON approval to build the hospital, but Mountain States had that approval reversed on appeal before a state administrative law judge. Wellmont recently challenged that reversal in state court (May 13, p. 36). It's a close call, but unless the state Legislature comes to its rescue a la HealthSouth, Wellmont will not get its hospital. Mountain States will prevail and keep its monopoly in the Johnson City market. The state of Tennessee loves healthcare competition, but not as much as it loves its for-profit healthcare companies. Even though both Wellmont and Mountain States are not-for-profits, Mountain States acquired six former Columbia/HCA Healthcare Corp. hospitals in 1998. That connection will serve Mountain States well.
Please note that in neither of these disputes has patient need come up.