Washington hospitals sue over CON law

Hospitals in Washington state argue in a lawsuit that the governor had no right last year to greatly expand what types of corporate changes need approval from the Department of Health.

Washington is among the three dozen U.S. states with laws on the books that require healthcare providers to prove a community need for a particular service before getting a permit for it. But changes ordered last year by Gov. Jay Inslee expand the certificate-of-need process to include reviews of hospital mergers, outsourcing of services and physician-employment changes.

“State agencies can't redefine what the law means after 20 years of interpreting the law the same way,” said Scott Bond, president and CEO of the Washington State Hospital Association, whose lawsuit against the state (PDF) cites 12 cases since 1992 in which the Health Department ruled that changes in corporate control didn't trigger certificate-of-need reviews.

The hospital association filed a petition Thursday asking a Thurston County Superior Court judge to rule that the state administration lacks the power to unilaterally reinterpret the CON law without action from the state Legislature.

Proponents of CON laws say they give states the ability to prevent wasteful and duplicative healthcare services that can drive up a community's costs. That includes when hospitals that want to provide elective stent procedures in an area where the demographics support only one hospital offering such services. Appeals courts have twice upheld Washington's right to regulate healthcare services in the past several years.

Last June, Inslee ordered (PDF) the Health Department to consider changing the rules because the old CON system wasn't keeping up with the industry changes ushered in by healthcare reform. The Patient Protection and Affordable Care Act had spurred rapid changes in the relationships between hospitals, systems and insurers that need close monitoring, the governor said.

That includes cases where just part of a hospital changes control through a business deal, according to the letter.

“The Certificate of Need process should be applied based on the effect that these transactions have on the accessibility of health services, cost containment and quality, rather than on the terminology used in describing the transactions,” the governor wrote, noting that access to reproductive services and end-of-life care must be ensured.

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