The Ninth Circuit Court of Appeals is allowing a commerce clause challenge to Washington State’s Certificate of Need (CON) laws to proceed. The Court found that the original federal legislation that authorized states to enact CON statutes, which was repealed in 1986, did not provide the State with the necessary congressional authorization to avoid a commerce clause challenge for a CON regulation it adopted in 2008. Since Vermont has recently limited its CON statute by disbanding the Public Oversight Commission, and it is unclear under the State’s Health Reform law exactly how the CON process will fit within our state reform efforts, other states’ experiences with their CON laws are worth watching.
In Yakima Valley Memorial Hospital v. Washington State Department of Health, — F.3d —-, 2011 WL 3629895 the State refused to license the Yakima Valley Memorial Hospital to perform elective percutaneous coronary interventions (PCI) under CON regulations that required examination of factors related to access to care, patient safety, quality outcomes, costs, the stability of Washington’s cardiac care delivery system and its existing cardiac care providers. The hospital challenged the regulations under the Sherman Act and the Commerce Clause. In deciding that the commerce clause challenge could go forward, the Court included a helpful, short history of CON laws:
The concept of certificate of need regimes, which many states enforce, is to avoid private parties making socially inefficient investments in health-care resources they might make if left unregulated. A certificate of need program corrects the market by requiring preapproval for certain investments and, in theory, thereby ensures that providers will make only necessary investments in health care…Congress made certificate of need regimes part of the federal government’s national health planning policy in the National Health Planning and Resources Development Act of 1974 (NHPRDA). The NHPRDA conditioned federal funding on enforcement of certificate of need regimes as part of the congressional effort to reduce health–care inflation and achieve an adequate supply and distribution of health resources…Congress repealed the NHPRDA in 1986, leaving states free to abandon their certificate of need programs… (citations omitted)
Yakima Valley, at 11212-11213.
The Court held that the hospital did not state a cause of action under the anti-trust laws but that it had proved standing and stated a cause of action under the Dormant Commerce Clause. The State’s argument that NHPRDA provided sufficient authorization for the State to engage in regulation that might otherwise be impermissible under the Commerce Clause was unavailing. There was no savings clause in the repeal. The Court remanded the case to the district court to decide whether the CON laws impermissibly burden interstate commerce.
Like Vermont, the majority of states still have CON laws. As is true in much of health care today, their ability to rein in costs and effectiveness is being questioned. Legal challenges such as Yakima Valley may advance the policy discussions and provide insight into the future of CON laws here and across the nation.