Bills seek end to 'Mother, may I?' system for new health care equipment

Posted April 21, 2015

— When Dr. Matthew Appenzeller scrubs in to repair a detached retina, his fee for that surgery will be the same whether he is working in a hospital operating room or an ambulatory surgical center. What his patients pay, however, could vary by hundreds or thousands of dollars, based on location alone.

"The No. 1 question on everybody's mind, regardless of where they are on the ideological spectrum, is how can we cut costs and ensure quality in health care," Appenzeller said last week as he made his way home from meetings with fellow doctors in Washington, D.C.

In the case of two surgeries, one performed in a hospital and the other in a outpatient surgical center, he said, "the only difference is going to be the bill on the back end from the facility."

That's why Appenzeller and other health care providers are pushing to end, or at least scale back, North Carolina's certificate of need laws. Drafted in the 1970s, CON laws seek to control health care costs by requiring a state agency to sign off before hospitals and other medical providers can add in-patient beds, operating rooms or medical equipment worth more than $2 million.

North Carolina is one of 36 states to still have an active certificate of need program, while 14 states have largely done away with the requirements altogether. Two bills, one filed in the state House and the other in the Senate, would get rid of some or all of those requirements. The House bill would exempt a handful of health care facilities, including outpatient surgical centers, from CON. The Senate bill would do away with CON entirely.

The health committees in both chambers are actively looking into those measures.

Advocates such as Appenzeller, a partner at Alamance Eye Center and legislative chair for the North Carolina Society of Eye Physicians and Surgeons, argue the certificate of need laws have outlived their usefulness and are now driving up health care costs for patients. That is a view shared by a cluster of conservative free-market groups, including Americans for Prosperity, as well as some Democrats. Rep. Mickey Michaux, D-Durham, a longtime lawmaker who is often a source of liberal-leaning institutional know-how, has joined Rep. Marilyn Avila, R-Wake, as the lead sponsor of the House bill.

Those pushing for repeal face opposition from those who say certificate of need holds health care chaos at bay.

Repealing CON "would be a disaster for rural health care," Sandra Greene, interim chair of Health Policy and Management at the Gillings School of Global Public Health at the University of North Carolina at Chapel Hill. Without the regulations, she said, boutique medical practices could siphon off the most profitable procedures and treatments, leaving hospitals with money-losers such as emergency rooms, behavioral health treatment beds and maternity functions.

Smaller hospitals, particularly those in rural areas, will suffer and potentially shut their doors as a result, Greene said.

"The free market doesn't work in most of health care," she said. "It's going to cost you less for your individual procedure, but in the long run, it's going to cost you more."

Keeping the doors open

When Avila held a news conference to push her bill earlier this year, she handed out a sheet that showed how the cost of bunion removal in Raleigh was subject to a $10,000 swing depending on where a patient had the surgery done and which health insurance option he or she had.

In Appenzeller's case, he said doctors in his practice began considering making a run at opening their own ambulatory surgical center when the local hospital took over an existing facility they had used. The nurses and operating facilities stayed the same, he said, but the costs for patients went up because a hospital now ran the center.

So, it's easy to understand why doing away with certificate of need is a perennial topic for lawmakers.

Pushback from hospitals has, in large measure, kept prior efforts from passing. For many communities across the state, the local hospital is the largest employer and one of the bigger economic forces in the area, giving it enough political clout to at least somewhat counter the combined push from doctors and free-market groups.

"Our standard has to be, we're open 24 hours, seven days a week. We take care of anybody who walks in and presents for care," said Larry Chewning, chief executive of Nash Health Care, an affiliate of UNC Health Care.

Those pushing to roll back certificate of need, Chewning said, are "on a completely different playing field."

Yes, he said, hospitals charge more, but that extra money goes to subsidize charity care and medical services that are not as lucrative.

"They're obviously pushing for this change in the law because they want to take advantage of service lines it is financially advantageous to be in," he said. "They're not wanting to build Medicaid birthing centers. They're not looking to build behavioral health crisis beds for the indigent."

Avila's bill does have a protection for smaller counties with regard to surgical centers. It would require local hospitals in counties with fewer than 100,000 residents to sign off on any new ambulatory surgical center. That would include Nash County.

But rural hospitals are often part of bigger networks or serve populations that border bigger counties. Nash County's southwestern corner, for example, knocks up against Wake County's easternmost point, where ambulatory surgical centers would be free of the CON requirement under Avila's bill.

Allowing specialty centers to cherry-pick the profitable services, Chewning said, could lard financial pressure on hospitals already scrambling to deal with changes in the health care industry brought about by tighter government budgets, pressure from insurers and unintended fallout from North Carolina's decision not to expand Medicaid as part of the Affordable Care Act.

To combat that criticism, Avila has included a requirement that newly created surgical centers provide a certain percentage of charity care every year. Chewning and Greene call that provision "unenforceable" and said it doesn't address the broad spectrum of needs a hospital tackles.

"We'll have 200 patients that we treat in the emergency room here today, and probably 40 or 50 of those will be uninsured and will have no financial resources to pay," Chewning said, "and we'll take care of every one of them."

Meanwhile, the hospital will host 10 patients for cataract surgery on a typical day, and virtually all of them will have some sort of insurance, many of them Medicare. While getting rid of CON may give those cataract patients a cheaper option, he said, nobody is creating a low- or no-cost emergency department.

"For certain types of procedures, there's no question you could get it done more cheaply than you could get it done in a hospital," Chewning said. "The question is, is it worth it for an individual to save a couple of hundred bucks on your cataract procedure if, in essence, it jeopardizes your local hospital's ability to stay in business?"

Patients could end up paying a high price for that cataract when their ride to an emergency room gets longer after having a heart attack, he said.

Advocates for scaling back CON laws point out that it is the same doctors looking for flexibility in how they treat patients that provide the charity care in those hospitals.


Lawmakers once again pushing for reform

Proponents of the CON repeal efforts point to statements issued in 2008 by the Federal Trade Commission and U.S. Department of Justice saying that CON programs "undercut consumer choice, stifle innovation and weaken market's ability to contain health care costs{{/a}}." Those statements came from officials in place at the end of Republican President George W. Bush's administration, and the Obama administration appears to have been largely silent on the topic.

Hospitals can sometimes run up against the wrong side of the certificate of need law.

For example, when UNC Health Care asked the state Division of Health Service Regulation for permission to buy a new linear accelerator to provide radiation for certain cancer treatments, the application was rejected because the state said UNC hadn't shown it was needed.

"The applicant did not adequately demonstrate the need the population projected to be served has for the proposed project," reviewers said, adding that UNC had also failed to show how the new equipment would help under-served populations.

"This proposal would allow UNC to provide radiation therapy to cancer patients closer to home, in a more convenient community setting. That can lead to higher patient satisfaction, better quality of life and improved outcomes," UNC Hospitals spokesman Alan Wolf said, adding that the decision is under appeal.

Advocates argue that businesses, whether they be hospitals or groups of doctors, are in the best position to evaluate whether a new piece of equipment is needed.

"If I want to invest our business dollars into technology that I think is going to benefit my patients and customers, we should be able to do that," said Dr. Bruce Schroeder, a Greenville breast imaging specialist, speaking on a video for Reform CON Now, a group pushing to roll back the laws.

Connie Wilson, a lobbyist for the CON repeal effort, told the House Health Committee on Monday that allowing more venues for procedures will drive costs down and save patients and insurers money in the long run.

The counter argument is that whatever savings patients see on individual procedures will be eaten up by doctors ordering more tests and providing more care overall. Left unfettered, that argument goes, boutique medical facilities will flood the market and drive up health care costs more generally by giving doctors incentives to push unneeded procedures or diagnostic tests. Critics point to stories that detailed that, after Pennsylvania dumped its CON laws, {{a href="external_link-7"}}the number of MRI machines in Pittsburgh rivaled the total number of the medical imagers{{/a}} in all of Canada.

While CON repeal bills have stalled in the past, their sponsors have bigger hopes for them this year, although there is not universal agreement on which way to head.

"It would be easier to do it all up front," said Sen. Tom Apodaca, R-Henderson, the lead author of a Senate measure that would dismantle CON laws entirely. "If you pick winners and losers, you're going to have the losers complaining."

Apodaca said he sees CON reform as integral to a broader effort toward health care reform in the state, including the reform of the state's Medicaid health insurance program for the poor and disabled.

Cody Hand, a lobbyist for the North Carolina Hospital Association, said the health care landscape is changing and that hospitals are doing their best to adjust. In five years, he said, the conversation around CON may have fewer losers. But for the time being, he argued, the law protects small hospitals that serve populations that would otherwise be deemed unprofitable.

"The question you need to ask yourself with this bill is, do you want an emergency room in your county?" Hand said.


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