ahpa perspective certificate of need regulation richard k. thomas, ph.d. september 28, 2015

AHPA PerspectiveCertificate of Need Regulation

Richard K. Thomas, Ph.D.September 28, 2015

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Credentials: AHPA• Oldest existing organization focused on

community health services planning• Only organization currently advocating for

publically oriented health services planning• Operated by experienced health planners

(many with CON experience)• Tracks state planning and CON activity• Frequently testifies on CON and other

health planning issues

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Credentials: Richard K. Thomas• 40+ years experience in health services

research, planning, and evaluation• Author of a widely used health services

planning text• Consultant to dozens of healthcare

organizations• Extensive involvement in the CON process and

in state health plan development• 20-year board member of AHPA

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AHPA Perspective:Initial Statement

• AHPA is not a proponent or an opponent of CON regulation in and of itself

• AHPA’s main interest is the promotion of the orderly development of the health care system

• The emphasis for over 50 years has been on the promotion of public and private community-oriented health services planning

• AHPA supports CON regulation to the extent that it serves this purpose

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Questionable Assertions Concerning CON

• Primary purpose of CON is to:• “Control” healthcare costs• Limit entry into the market• Protect existing providers• Limit the expansion of services

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Original Purpose of the National Health Planning Act (PL 93-641)

• To manage, through regional planning and supportive regulation, the supply and distribution (location) of health services

• Other functions are subsidiary to this• CON regulation was to be used a tool to this end• In implementing CON other functions may have

been added

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Benefits DerivedFrom CON Regulation

• Improves access to care (especially for the underserved)

• Supports safety net hospitals• Supports rural hospitals• Assures availability of services to the

community• Assures the provision of charity care

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Benefits DerivedFrom CON Regulation (cont.)

• Establishes standards for the provision of services

• Prevents unqualified entities from providing certain services

• Limits excess bed capacity• Assesses quality by monitoring

outcomes

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Benefits DerivedFrom CON Regulation (cont.)

• Discourages unnecessary growth/expansion• Standardizes processes for service and

facility development• Encourages alignment of supply and demand• “Stops some of [the really bad] ideas”• Creates a forum for public involvement and

discussion

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Comments on Attempts toEvaluate the Impact of CON

• Numerous attempts over the years to evaluate the impact of CON

• Some designed a priori to discredit CON• Many conducted by researchers with limited

knowledge of healthcare • Most flawed in some major way• Most come to tentative rather than definitive

conclusions

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Challenges in ConductingEvaluation of CON

• Circumstances are different in every state (and among CON programs)

• Difficult to measure the relevant variables (e.g., quality, access, costs) or to even track the utilization of services

• Many difficult to measure factors affect the operation of the system and its attributes

• Very difficult to isolate, much less assess, the effect of CON regulation

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The Impact of CON on Competition

• Detractors often argue that CON regulation stifles competition

• We have tried to operate as a competitive market for many decades, but there is little evidence of positive benefits

• Arguably the most profit oriented healthcare system in the world

• Many assume that healthcare operates like a traditional “market,” but does it?

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No Market = No Competition

Many economists acknowledge that healthcare does not have the characteristics of a competitive market• No efficient, rational way of setting prices and ensuring

adequate access to care• Little relationship between costs, prices and payments• Consumers do not make most of the purchase

decisions• Consumers (and professional decision makers) often

do not know prices or take them into account• Normal laws of supply and demand do not operate

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The Impact of CON on Supply

• Some argue that CON artificially limits supply by preventing entry of new providers

• Admittedly there is some localized shortage of certain personnel and services

• Main problem often is maldistribution, not limited supply

• U.S. overall has higher rates of facilities, personnel and equipment than most countries

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The Impact of CON on Supply

Counter argument:• To the extent that CON operates to assure

appropriate allocation of resources, it reduces the likelihood of maldistribution and localized shortages

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Response to FTC Testimony

Questionable value –includes information that is:• Outdated• Misleading• Irrelevant• Unsubstantiated

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Response to FTC Testimony

Based on published results of 2003 FTC hearings• Much of the testimony based on

outdated information and data• Reflects very different circumstances

than exist today

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Response to FTC Testimony

Very little based on defensible research:• Opinions accepted as fact• Stated facts are cherry-picked to reflect

often unique situations• Situations described without full context• Persistent use of “may”, “could”,

“potentially”, “may possibly” indicating little or no solid evidence

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Response to FTC Testimony

Presentation of irrelevant arguments:• Comparison to anti-competitive

situations that are not related• Reference to cases in other industries

quite different from healthcare

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Response to FTC Testimony

Unsubstantiated statements:• Little supporting documentation (even in

original hearings)• Claims that could not possibly be verified• Presentation of statistics without citation,

documentation or context

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Response to FTC Testimony:Case in Point

Virginia COPN has artificially limited the number of beds available to patients:• Claim that the U.S. has 362 beds per

100,000 population today• Because of COPN Virginia has only 231

beds per 100,000 population• Thus, Virginia residents are deprived of

needed beds (i.e., a deficit of 10,800 beds)

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Response to FTC Testimony:Case in Point

Irresponsible presentation of data:• At the time of the 2003 hearings U.S.

had <290 beds per 100,000• Today the U.S. has < 250 beds per

100,000• Today Virginia has 220 beds per

100,000

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Response to FTC Testimony:Case in Point

If it means anything, the FTC testimony proves the opposite of the point argued:• The U.S. had (and has) too many beds• Virginia had (and has) a more appropriate number of beds• The U.S. ratio has been (and is) moving closer the Virginia

ratio• Did Virginia COPN regulation cause it to have a more

appropriate bed ratio?• COPN regulation certainly did not cause Virginia to have a

more inappropriate ratio

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Response to FTC Testimony:Case in Point

If the bed ratio is a relevant indicator (and it’s not):• The correlation between the bed ratio and

the presence of CON requirements is not strong

• Non-COPN states picked at random all have a lower bed ratio than Virginia (Arizona, California, Colorado, Idaho)

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Response to FTC Testimony:Case in Point

• Moreover, variation in the hospital and nursing home bed to population ratios is greater among Virginia’s planning regions than it is among states with and states without CON regulation

• Given that COPN regulation applies equally in all Virginia planning regions, it cannot be argued that the intrastate variation is a function of the presence or absence of CON regulation

• The FTC and other opponents of CON regulation do not address this phenomena and its likely implications

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Response to FTC Testimony:Case in Point

The same point could be argued with the other examples:• Nationwide we have too many facilities,

too much equipment, and do too much testing

• Virginia’s rates and experience, it could be argued, likely reflect a more appropriate balance of supply and demand

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Have changes in the healthcare system eliminated the need for CON?• Argument has been made that changes in

the system make CON no longer necessary• Case based primarily on the assumption that

the primary purpose is to “control” costs• Argued that elimination of cost-based

reimbursement makes CON no longer relevant

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Have changes in the healthcare system eliminated the need for CON?• Main purpose of CON is not cost control• Nevertheless, the cost of healthcare

continues to be an issue• Other issues that prompted the need for

CON regulations remain • Increases in health disparities indicate that

problems have not been eliminated

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Have changes in the healthcare system eliminated the need for CON?Counter argument• Shortages/maldistribution of facilities, services

and personnel persist• Millions of newly insured patients making

demands on the system• Emergence of “population health” approach with

emphasis on system-wide remedies• New evidence of potential reduction in the overall

healthcare costs

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AHPA Perspective:Closing Statement

• AHPA is not a proponent or an opponent of CON regulation

• AHPA’s main interest is the promotion of the orderly development of the health care system

• Our emphasis for more than 50 years has been on the promotion of community oriented health services planning

• We support CON regulation to the extent it serves this purpose

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AHPA Perspective:Closing Statement

• As suggested above, it is virtually impossible to evaluate accurately and reliably the impact of CON regulation

• Relatively few opponents of CON regulation are objective observers; many are philosophically opposed to regulation and appear to have an ideological opposition to CON

• There are ways in which to improve the CON process; grounding it in a transparent community oriented health services planning program is critical

• To the extent that CON regulation contributes to the orderly development of the healthcare system, AHPA will continue to be supportive

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AHPA Perspective:Additional Information

American Health Planning Association7245 Arlington Boulevard, Suite 319

Falls Church, Virginia 22042703-573-3101

info@ahpanet.org