Virginia’s Controversial Certificate of Public Need (COPN) Law Withstands Legal Challenge

If you are a healthcare provider who wants to establish a new healthcare facility in a state like Virginia, you must first convince the state and your existing business competitors in the state that your healthcare facility is necessary. This is called obtaining a Certificate of Public Need (COPN), also known as Certificate of Need (CON). It is a process required by the state law of many states, including Virginia.

Virginia COPN Law

In Virginia, this process involves the State Health Commissioner approving the new venture based on: 1) the relationship of the project to the long term health care state plan; (2) the need for enhanced facilities to serve the population of an area; and, (3) the extent to which the project is accessible to all residents in the proposed area and the immediate economic impact and financial feasibility of the project on the immediate area.

In this process, healthcare facilities are required to prove that their business is necessary for that geographic area. But what is most difficult is that you must do so over the objections of your already established competitors in the area. Effectively, competitors who want to keep their share of the market have veto power over the new business venture.

Under Virginia Code § 32.1-102.3, a  COPN is required to establish any medical care facility, add beds or operating rooms to existing medical facilities, convert medical beds from one type to another, relocate medical beds from an existing facility, introduced a new nursing home service, introduce a specialty clinical service, add medical equipment to an existing medical facility, or make large capital expenditures for a existing medical facility, as determined by the State Health Commissioner.

Similar Laws in Other States

Virginia is not the only state in the nation to require this. There are 36 states that currently have similar CON laws. Most CON laws came about as a result of the federal Health Planning Resources Development Act of 1974. But the federal mandate was repealed in 1987. Some states discontinued CON procedures and repealed the CON laws. But many still enforce the CON process. CON laws were originally designed as a health planning tool to control access to care across a state but have become a battleground for providers to gain and keep market share.

Pros and Cons

Due to their restrictive nature, CON programs have been a subject of wide debate across the country. Supporters of CON programs believe that these programs allow states to distribute medical facilities across different areas in their state and help avoid the establishment of unnecessary medical facilities. The opponents of CON programs believe that these programs are monopolistic and contribute to higher prices because of reduced competition. Opponents also believe that these laws place unfair restrictions on new businesses and, as such, are against the free flow of interstate commerce.

Challenge to Virginia COPN Law

The Virginia COPN law recently withstood a federal challenge in the case of Colon Health Centers of America LLC et al. v. Hazel et al. in the U.S. District Court for the Eastern District of Virginia. A federal judge granted summary judgment in favor of Virginia and ruled that Virginia’s COPN law requiring new medical facilities to get a COPN before being allowed to open a medical facility in the state does not discriminate against interstate commerce. The Plaintiffs wanted to open a colonoscopy center and an MRI office in Virginia but were not allowed to do so because they were not able to get a COPN. The judge essentially deferred to the state.

It appears to be seen whether Virginia will ever repeal this law. It seems that this law is currently popular with the existing healthcare facilities in the state because it allows existing healthcare facilities to keep control of market share in a given geographic area.

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