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11 posts categorized "Certificate of Need"

December 22, 2008

Partners Healthcare, competition, regulation, and the redeeming virtues of robust quality and cost data

The Boston Globe Spotlight Team had another installment of its Partners Healthcare saga in Sunday's paper.  The general gist: Partners horning in on community hospitals in their home commmunities, Jack Connors (board chair at Partners) extolling the virtues of the free market (with some less-than-kind words for the competition), community hospital execs and other partisans questioning the appropriateness of Partners' expansion.  See Kevin, M.D.'s cogent summary and commentary as well.  As some have noted, this isn't exactly news, but I'll take it as an opportunity to make a couple of points.

Beverly Hospital, complaining about Partners horning in, did the same on a smaller scale, competing against smaller North Shore facilities.  So it may not be Beverly's place to complain at this stage of the game.

Nevertheless, the question is raised: should health care resources be developed in an unregulated manner?  Is this really an enterprise appropriate for the free market?

As an unreconstructed former certificate of need lawyer for the Commonwealth, I would have to answer: Not yet.

Frankly, we have all seen quite recently and quite vividly the havoc wreaked by the private sector let loose in the until recently unregulated, or under-regulated, banking, financial services and auto industries.

Viewed from the health care system level, it is apparent that there is an appropriate level of health care resources that ought to be made available to the residents of the Commonwealth, and that if more are made available (in a certain specialty or in a certain geographic area), we enter the Field of Dreams school of health care planning ("if you build it, they will come") -- and we will all, collectively, get socked with the bill, because most, if not all, of these services come with a whole host of fixed costs that are added into the cost of health care in Massachusetts whether they are fully utilized or not.  Thus, the costs of the "old" service as well as the cost of the "new" facility built across town end up dragging us down.  As I never tire of saying: in a perfect world, I'd rather see excess health care dollars spent on childhood vaccines and other primary and preventive care.

Massachusetts'  legislature and Department of Public Health have responded to the latest rash of providers with an edifice complex by reinstituting determination of need jurisdiction for certain outpatient facilities (those with a price tag of $25 million or more), but the regulations are too little, too late; the facilities described in the Globe article (and others) all predate the new law or are grandfathered by its provisions.

Is there a role for competition in health care markets?  I would agree with Kevin Pho (see link above) and say that there is, but that the currency on this field of play (to mix metaphors) should be cost and quality, not economic market power.  Massachusetts is taking some baby steps in this direction, with the recent launch of the Massachusetts Health Care Quality and Cost Council website, MyHealthCareOptions.  That site is a work in progress, but it shows promise.

If health care purchasing decisions may be de-linked from brand-name marketing and linked instead to cost and quality indicators, I would have to believe that all players would be reasonably satisfied.  Teaching hospitals need not compete on cost for routine procedures, and community hospitals need not compete on quality for procedures on the bleeding edge. 
For a time, the thinking was that third-party payors would be able to incorporate cost and quality factors into the calculus to such a degree that CON jurisdiction could be cut back appropriately.  The legislature has recently expanded that jursidiction (as discussed above), judging that we aren't there yet.  In the presence of a robust market with providers competing on the basis of cost and quality, and ultimate health care payors having sufficient information on which to base purchasing decisions, CON (or as we say here in Massachusetts, DON) wouldn't be necessary, and we'd hear less crowing and whining.  

Update 12/29/08:  The Boston Globe comes back for more, alleging an antitrust violation in an unwritten agreement between Partners and Blue Cross Blue Shield of MA.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

August 12, 2008

The latest health care legislation from the People's Republic of Massachusetts

Once again, Massachusetts is out in front on a number of hot issues.  The legislation, championed by Senate President Therese Murray, was signed by Gov. Patrick earlier this week.  See the full text of AN ACT TO PROMOTE COST CONTAINMENT, TRANSPARENCY AND EFFICIENCY IN THE DELIVERY OF QUALITY HEALTH CARE and the Boston Globe story on the new health care law.  The Globe highlights parts of the act that: 

  • Limit pharma industry gifts to providers
  • Provide some funding to get physician offices on EHR systems
  • Require UMass Medical School to graduate more PCPs
  • Institute closer oversight of health insurance premiums

Also of interest are:

  • The mandate for hospitals and community health centers to all be on EHRs by 2015
  • The requirement that facility with EHRs and CPOE be made a condition of physician licensure
  • The HAI and med error reporting requirements, and
  • The reintroduction of DON (that's CON for the rest of the country) jurisdiction
    • for outpatient projects if the capital budget is $25 million or more (ambulatory projects were deregulated years and years ago), and
    • for all ambulatory surgery centers -- not just multispecialty ASCs, and including physician office based ASCs.

A few observations: 

The doom and gloom gang at PhRMA say the gift limits and disclosure requirements will end up marginalizing Massachusetts-based researchers.  Seems unlikely to me.

The $25 million set aside for EHRs is a nice gesture.

More PCPs are key to making the universal health insurance law work -- we have a whole buch of newly-insured folks here in Massachusetts (325,000 or so), and not all of them can access a PCP, because we just don't have enough.

I still have that central health planning gene (thanks to a stint in state government a long while ago), so from the system perspective I am not that put off by the expansion of DON jurisdiction.  I reserve the right to argue differently, of course, in the case of a particular project.

And last of all, let's hope that the HAI and med error reporting system yields some new learning that can help avoid future incidents and errors.

-- David Harlow

July 28, 2008

Pan Mass Challenge coming up this weekend

This summer has been busy, busy, busy, so my apologies to all of you out there in HealthBlawg land for spotty posting lately.  My clients didn't get the memo about a nice long vacation this month or next, and I've been training for the Pan Mass Challenge, a 2-day, 200-mile bicycle fundraiser for Boston's Dana Farber Cancer Institute, which is coming up this weekend.  Think of me biking this weekend, and hope for nice weather.  If you are so inclined, please consider joining me in supporting the Dana Farber's Jimmy Fund by sponsoring my PMC ride via the link above.  I hope to be back soon to post about Massachusetts' revised DON regulations (that's CON regulations for everyone else) and green health care facility construction guidelines, a recent OIG advisory on a physician-hospital ASC JV, and the steady stream of other health care law and policy developments.

-- David Harlow

January 25, 2008

New Jersey's Governor's Commission on Rationalizing Health Care Resources issues final report

New Jersey's Governor Jon Corzine finally got a final report from the commission on rationalizing healthcare resources he created by executive order just over 15 months ago.  Unlike the Berger Commission in the neighboring Empire State (which issued its final report just after the N.J. commission was authorized), the N.J. commission did not recommend specific hospital closures, but did recommend that the state CON requirements for hospital closures be revisited (one of the things I was involved with when I worked for the Commonwealth of Massachusetts -- the old Acute Hospital Conversion Board).

The N.J. commission, headed by Uwe Reinhardt, also clearly advised against bailing out bondholders of any hospitals that do end up getting shut down, perhaps anticipating, in part, panhandling that may have been encouraged by the Berger Commission approach.  (As a law school professor of mine was fond of saying, "You pays your money, you takes your chances.") 

This is a dense, comprehensive report that will bear further reading and analysis.  The challenge to Governor Corzine will be to take the recommendations of the commission to heart and to make, or authorize, some unpopular decisions -- so that hospital closure and consolidation, which is likely unavoidable, can take place in as orderly a fashion as possible.  The challenge to the hospital community is to begin to engage in self-examination and self-improvement, and in review and development of strategic alliances, so that they will have as much of an impact as possible on the design of New Jersey's future hospital landscape.   

-- David Harlow

December 11, 2007

Private equity, public accountability, nursing facilities and grandstanding

Bob Coffield's recent post on a pending reconsideration of a West Virginia CON issued to The Carlyle Group (a private equity firm) for the acquisition of HCR Manor Care (a publicly-traded company with about 275 nursing facilities nationwide) got me thinking about the appropriateness of using these sorts of procedural acrobatics to address what may or may not be legitimate concerns about quality of care and transparency. 

SEIU 1199, the party that called for reconsideration, opposes transactions like this one all around the country, and even testified recently at the House Ways and Means Committee hearing on nursing facility ownership and accountability -- the same day it filed its request for reconsideration in West Virginia, by the way.  The hearing focused on the advisability of allowing private equity firms to own nursing facilities through subsidiary corporations, given the opacity of the corporate structure, insulation of the folks at the top from liability for substandard care that may be provided at individual facilities, and general alleged propensity of private equity firms to cut costs in order to pump up profits at the expense of patient care.  See the NY Times article on this issue, a few weeks ago, covering the hearing.  The industry associations (still controlled by the public companies, as the private equity folks own just a small percentage of nursing facilities nationwide) seem to be carrying the water on this issue; The Carlyle Group didn't even show up at the Ways & Means hearing.

Seems to me that SEIU is in this largely for the membership: Manor Care is essentially an open shop, and SEIU is presumably looking to cut a deal with management to ensure enrollment of a few new members among the company's 60,000+ employees.  (Tip of the hat to Politico.) 

The key principled objection seems to be lack of accountability, though to hear the advocates tell the tale, it's hard to see how regulators could hold anyone less accountable than they've held the large publicly traded companies (and their operating subsidiaries) that are now being bought up by private equity firms.  While the public companies -- and the private equity firms -- are all subject to the same licensure and certification standards as any local business owning and operating a nursing facility, in many states, they were (and are) considered "too big to fail."  Single-purpose entities and insulation of CEOs from front-line operational responsibility are nothing new; they've been part of corporate America -- and part of the medical-industrial complex -- for quite a while now.

Rather than simply continuing the demonization of for-profit ownership of health care operations, I hope that this dialogue results in one of three things: (1) some reasonable concrete standards for review of changes in ownership, and operations, of nursing facilities (hard to write, hard to enforce); (2) a policy decision that all health care facilities must be owned and operated by not-for-profit or governmental entities (not bloody likely); or (3) an acknowledgment that the present system, however imperfect, represents a reasonable balancing of interests.  The complaints are not new; the proposed solutions are not new.  Spinning wheels in political machinery are not new.  Perhaps there can be a new accommodation of interests so that appropriate operations of facilities, with a reasonable degree of accountability and transparency, can take place even in the presence of private equity ownership.

-- David Harlow

August 09, 2007

August 2007 Massachusetts certificate of need applications for radiation therapy

Well, let's cut to the chase: there aren't any.  That's right, no applications were filed August 1 for radiation therapy CONs (or DONs -- determinations of need -- as we call them here in the People's Republic of Massachsuetts). 

Highly unusual, no?  Could you imagine if the FCC held a bandwidth auction and nobody came?  I don't think this has ever happened before. 

Could it be that DPH has overestimated need for the service?  Or could it be that in the face of the byzantine need formula (which takes note of certain existing resources but not others), "the center cannot hold"?

Next filing date is February 1.  We'll see what happens then.

-- David Harlow    

November 29, 2006

New York State Commission on Health Care Facilities in the 21st Century releases its final report recommending significant bed closures and mergers

The NY State Commission on Health Care Facilities in the 21st Century released its final report yesterday.  Its recommendations include the closure of nine hospitals, merger or other restructuring of about fifty hospitals and the elimination of 4,200 hospital beds (7% of the state's total supply), and the closure of 2,000 nursing facility beds (4% of the state total).

Many of the institutions welcome these recommendations and have been involved with their development. 

The press release accompanying the report notes:

The Commission’s recommendations will produce an estimated total benefit to payors and providers of over $1.5 billion annually, or $15 billion over ten years. Included in this figure is an estimated $806 million annually in savings to Medicaid and other payors. Thebenefits to providers in the form of reinvestment opportunities are estimated to be $721 million annually.

. . . .

The Commission’s report also includes recommendations for broad policy reform in the areas of reimbursement, the uninsured, primary care infrastructure, workforce development, the SUNY hospitals, county-owned nursing homes, and information technology. Such recommendations provide a blueprint for further efforts to fully reconfigure the health care system.

As the former CON lawyer for the Commonwealth of Massachusetts, I still have the central health planning gene somewhere in my makeup.  Even though I realize that the need to close and consolidate facilities is a result of market pressures from payors and specialized competitors, part of me reacts to this report by thinking: What a colossal waste of resources!  This could have been managed so much better with a little central health planning.  Those were the days . . . .

The approach to nursing facility bed reduction is philosophically similar to policies in play here in Massachusetts -- the idea is that many nursing facility residents could be cared for in community-based settings.  While this may be true for some residents, the advocate community is rightly concerned that perhaps too many residents may be displaced or may be left in the future without appropriate placements.

As other states consider undertaking studies such as the one New York has just completed (New Jersey comes to mind; I'm sure there are others), it will be very interesting to see how the implementation of the recommendations in this report unfold. 

-- David Harlow

October 19, 2006

. . . And then there were four (Massachusetts CON applications for linear accelerators)

Only four of the six CON applications filed with the Massachusetts Department of Public Health earlier this month for radiation therapy services are still pending. 

This week, DPH rejected the New England Radiosurgery application for certain technical deficiencies, and Brigham and Women's Hospital withdrew its application for a service in Dartmouth, MA. 

In addition to the four remaining applications for new services, three expansion applications are pending as well (including one filed just last week).

-- David Harlow

October 12, 2006

Another Massachusetts radiation therapy CON application filed

As reported earlier by HealthBlawg (here and here), October 1 was the application filing date for new CONs (or, as we call them here in Massachusetts, DONs) for radiation therapy.  Another application rolled in yesterday from St. Anne's Hospital, bringing the total to three applications for expansion units (to be considered outside the eight-unit cap on new services).  To the surprise of many observers, only six applications for new services were filed (applicants listed here).

Today's Boston Globe story notes that most existing services are in Boston, and most of the pending applications are to develop services out in the suburbs. 

It will likely be months before these applications are reviewed.

October 03, 2006

Massachusetts radiation therapy CON applications filed

The recently revised Massachusetts DON guidelines stated that there is need for eight additional radiation therapy units statewide, and applications for eight additional units were filed on the October 1 filing date.

Two applications are for expansion units -- Cape Cod Hospital and Massachusetts General Hospital at Newton Wellesley).

Six applications are for new providers -- Southcoast (in Fairhaven), Carney and Milton Hospitals, as Mass Bay Radiation Services (at Carney), Cambridge Health Alliance (at Whidden, in Everett), Dana Farber at Milford, Brigham and Women's at Hawthorn Medical in Dartmouth, and New England Radiosurgery (an affiliate of an existing MRI and PET provider).

Expansion applications may be filed any business day, so additional applications may well be filed in the near future by other existing providers.