Virginia?s Certificate of Public Need Program
In the early 1970?s, there was a lot of concern about the rising costs of Medicaid and Medicare. In 1972, the Social Security Act began regulations to try to reign in these costs. The National Health Planning and Resources Development Act was passed in 1974. This Act required states to operate Certificate of Public Need (COPN) programs as a condition of receiving federal funding for health care. The federal COPN requirements were premised on providing orderly planning of health systems to meet the ?needs? of the defined population and restricting the overbuilding of facilities, which was perceived as responsible for the high costs of medical services. The issues at the time of the issuance of this legislation were access to primary care, distribution of services in medically under-served areas, prevention, costs, utilization review, and education of the public in personal care and in use of the health care system.
Virginia first enacted a COPN law in 1973, one year prior to the federal law requiring state COPN programs. The adoption of the COPN legislation marked the beginning of a new role for the Commonwealth in health care regulation. The State became the regulator of development for all nonfederal medical facilities. For the first time, owners of such facilities were required to obtain prior state approval before undertaking large capital expenditures, an alteration in bed capacity, or a change in service. The Virginia COPN?s objectives included promotion of comprehensive health planning, promotion of the highest quality of health care at the lowest possible cost, the avoidance of unnecessary duplication of medical care facilities, and the provision of an orderly administrative procedure for resolving questions concerning the necessity of construction or modification of medical care facilities.
The Virginia COPN process begins with the applicant filling out an extensive application. An application must be processed for a capital improvement over $400,000, any new institutional services over $250,000, and any modification to the number of beds. The preparation and filing of a COPN application is the most time consuming part of the review process. The applicant must provide extension information about their company and its financial standing. They must prove there is a need for the project and that they can acquire sufficient financing for it. Most importantly, the applicant must present a detailed plan on how their project will be the most cost efficient for the government. It is difficult to ascertain with any certainty the cost of preparing a COPN application. The Virginia Hospital Association estimates that the fee for just applying for a COPN can range anywhere from $500 to $10,000 depending on the project type and size.
Once the application is finished, it is sent to the Bureau of Resources Development (BRD) which is a department within the State Department of Health. BRD then forwards a copy to the Health Systems Agency (HSA) where the proposed project is located. BRD and the HSA must jointly agree that the application is complete before the formal review process is triggered. Once this has occurred, there is an initial public hearing. At this hearing, people are allowed to voice their opinion on the need for the project and make recommendations for the project. After the public hearing, the HSA Board may receive recommendations on a project from two other bodies: the Sub-Area Council and the Project Review Committee. Both the Sub-Area Council and the Project Review Committee is made up of HSA members. The final recommendation of the Board must be forwarded to the Health Commissioner within sixty days of the time an application is accepted for review. Following the HSA review, the Facilities Review Committee holds another public hearing at which the applicant and the HSA each testify. The Committee then formulates a formal recommendation that is submitted to the Commissioner of Health. The Commissioner then approves or denies the application. Once the Commissioner has approved or denied an application, his decision is communicated by letter to the applicant. From start to finish, the COPN process takes about one year.
If an applicant is not pleased with the Commissioner?s decision, they have thirty days to appeal. The appeal process has four levels. The first level has the Commission reconsider his decision. Level II is a formal evidentiary hearing. The third level of appeal for the COPN process is a formal independent hearing. The last appeal option open to the applicant is to have a court to review the Commissioner?s decision. Appeals are usually based on the complaint that the Commissioner had some sort of favoritism in his ruling.
The COPN process has brought a better distribution of health resources, but it hasn?t controlled the rising health care rates. It has not slowed inappropriate utilization of facilities and services. The COPN process was flawed from the beginning. One defect was the way the process put emphasis on high-cost technologies with no attention to low-cost technologies. The high volume use of low-cost technology has caused a continuing rise in health care cost. The COPN process also does not consider operating costs associated with installing and using the technology. Medical facilities have gotten around the COPN process as it evidenced by their rise in total assets per bed.
The inability of the COPN process to achieve its fundamental goal, the slowing of capital expansion and overall cost growth, ultimately led to its decline. In 1986, the federal government repealed its requirement for states to have COPN programs. In 1991, only 39 states still had these programs. During the 2000 Virginia General Assembly Session, a large number of bills were introduced either repealing COPN outright or repealing COPNs for a specific service. Senate Bill 337 passed the Assembly as a compromise measure agreed to by physicians, who conducted an all-out fight to repeal COPN, and hospitals who fought to keep COPN. The legislation, which still must be signed by the Governor, requires a transition to eliminate COPN. The transition will begin on July 1, 2001 and must be completed by July 1, 2004. Between now and the 2001 General Assembly Session, the Joint Commission on Health Care has been charged with developing the transition plan, with assistance from the Departments of Health, Medical Assistance Services, and Health Professional to end COPN. Of course, physicians would like COPN to be repealed so they can purchase technology and offer new services. Hospitals argue that if their profitable services are deregulated and significant competition exists for these services, hospitals will be unable to continue to provide the indigent care and unprofitable services that they must provide under state law.
I believe there are several issues in the COPN repeal argument. First of all, the COPN process has not met all of its goals. Mostly, it has not controlled costs. The repeal of COPN legislation would promote competition and drive down the costs of medical care for consumers. But we must look at what this would mean for our hospitals and long-term care facilities. Hospitals and nursing homes receive .72 from Medicare and Medicaid for every dollar they spend. Many times, these facilities are also located in unprofitable rural areas. If the COPN legislation was repealed these facilities would lose many profitable consumers to lower cost private facilities. This could mean that hospitals would have to close their doors since they are would be unable to recover from expenses they incur by providing care that is required by law to the indigent. This would also have negative effects for rural areas. If the COPN process was repealed, individuals would only operate in areas where they believe they could profit. This is unfortunately most times only in urban areas. Repealing the COPN laws may have many positive effects, but a good transition plan must be in place before the repeal will mean anything but disaster for the health care industry and for the public accessing this industry.
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