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From Antitrust Law Daily, October 26, 2015

Antitrust agencies urge reform of Virginia Certificate-of-Need Laws for health care facilities

By Linda O’Brien, J.D., LL.M.

The Department of Justice Antitrust Division and the FTC have recommended that the State of Virginia reform its laws regulating the building of hospitals and the process of health care services. In response to a request by Kathy Byron, a Virginia state delegate, the joint statement submitted to the Virginia Certificate of Public Need Work (COPN) Group recommends the state consider whether its COPN program best serves the needs of its citizens.

The Work Group is studying possible reform of Virginia’s COPN laws. Although they vary considerably by state, certificate-of-need (CON) laws, including Virginia’s COPN laws, typically require certain health care providers to obtain state approval before expanding, establishing new facilities or services, or making certain large capital expenditures.

According to the joint statement, the Justice Department and FTC historically have urged states to consider repeal or reform of their CON laws because they can prevent the efficient functioning of health care markets that may harm consumers. CON laws have created barriers to expansion, limited consumer choice and stifled innovation.

Incumbent providers may use CON laws when seeking to stop or delay entry by new competitors. CON laws can also deny consumers the benefit of an effective remedy for antitrust violations and can facilitate anticompetitive agreements. Arguments favoring CON laws have not been supported by the evidence.

The joint statement concludes by recognizing that states must weigh a variety of policy objectives when considering health care legislation. However, CON laws raise considerable competitive concerns and generally do not appear to have achieved their intended benefits for health care consumers. For those reasons, the agencies suggest that the Work Group and the General Assembly consider whether Virginia’s citizens are well served by its COPN laws and, if not, whether they would benefit from the repeal or retrenchment of those laws.

“The evidence suggests that certificate-of-need laws have not served consumers well,” said Bill Baer, Assistant Attorney General in charge of the Antitrust Division. “They raise the cost of investment in new health care services and can shield incumbents from competition that would benefit consumers and lower costs. By reexamining the certificate-of-need process state policymakers have an opportunity to invigorate competition in this important sector, to the benefit of patients, employers and other health care consumers.”

“Our joint comment reflects the antitrust agencies’ longstanding efforts to promote competition in healthcare provider markets,” FTC Chairwoman Edith Ramirez said. “Because CON laws can make it harder for new healthcare facilities and technologies to enter the marketplace, we are concerned that they may facilitate anticompetitive mergers and conduct that raise prices for consumers and reduce their access to new sources of care.”

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