Author: Mohammad Mesbahi

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 But the federal mandate was repealed in 1987. Some states discontinued CON procedures and repealed the CON laws.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.

Unexpected Large Medical Bills: Balance Billing is Not Prohibited in Many States

Imagine that you receive a medically necessary surgery from an out-of-network specialist. You pay your co-insurance or co-pay and your health insurance authorizes the surgery agreeing to pay the remaining cost. Then, a month later, you receive a bill from the specialist for the difference between what they charged and what your insurance company paid them. The specialist charged an above-average rate and the health insurance did not cover all of the charge. Now you are stuck with a massive bill that you never saw coming. To make matters worse, you are threatened with being placed in debt collections by the specialist if you do not pay! This is called balance billing, or sometimes extra billing, and is not only legal but also common in 37 states.

Balance billing is really a dispute between physicians and health insurance plans but it is the patient that gets stuck in the middle of it and ends up financially responsible. The main cause of the dispute is that the physician, usually an out-of-network physician, does not have any contract with the health plan and thus, is not bound by a pre-negotiated charge for the service. The health insurance companies usually pay a rate that is a little higher than the Medicare rate for the particular service. Then the unsatisfied physician will bill the patient to recover the difference for the service performed. Many physicians do not like the low reimbursement rates of the various health insurance plans and choose to be out-of-network.

The Affordable Care Act does not require all healthcare plans or managed care organizations to cover non-emergency balance billing amounts nor does it prohibit balance billing for non-emergency services. However, this does not give a free reign for providers because not all kinds of balance billing are allowed in the United States. Balance billing beneficiaries of TRICARE is prohibited. The Centers for Medicare and Medicaid Services (CMS) also prohibits balance billing of all qualified Medicare beneficiaries and Medicaid members. Furthermore, balance billing is not allowed for emergency out-of-network service under the 2010 patient protection amendments to the Public Health Service Act. And for virtually all in-network providers, i.e. providers who have contracts with managed care organizations, there are provisions in their contracts that prohibit them from balance billing the patient. Yet, this still allows balance billing of patients with private health insurance by out-of-network providers. Consequently, some states have tried to address this gap with legislation.

Thirteen states led by New York, Maryland, and California have enacted statutes prohibiting balance billing by out-of-network providers. Under the patient-protection oriented state laws of Maryland, New York, and California, providers cannot balance bill patients and this restriction applies across the board to all situations including in-network, out-network, HMOs, and PPOs. The District of Columbia and the Commonwealth of Virginia only prohibit balance billing of in-network HMO patients but allow balance billing for patients with out-of-network health plans and PPO plans.

When these disputes occur, a lot of patients end up taking their frustrations on their health insurance company. Therefore, some health insurance companies, like Aetna, seek to protect their members by taking legal action against the out-of-network providers who balance bill, especially when it involves unreasonable and uncustomary charges for a particular service.

Patients would be wise in making efforts to avoid unexpected bills by making sure beforehand that their specialist does not balance bill. Patients should also keep up-to-date with the state laws regarding balance billing. In the event that balance billing occurs and is not prohibited in a given state, patients should avoid debt collection by negotiating with the provider.