States' OK for hospitals disputed

The Bush administration recommended yesterday the elimination of state approvals for hospital construction and expansion, saying the process does not effectively control health care costs and, in fact, poses "serious anti-competitive risks."

In a much-anticipated report on health care competition, the Federal Trade Commission and the Justice Department said so-called "certificate of need" laws should be reconsidered.


The Illinois Health Facilities Planning Board implements the state's version of the law, certifying the need for hospital expansion and some equipment purchases. Eliminating the certificate-of-need law there would render obsolete a board that has been criticized as unnecessary for years and now is at the center of a federal criminal investigation into extortion allegations.

State approval programs "are not successful in containing health care costs, and they pose serious anti-competitive risks that usually outweigh their purported economic benefits," the federal report said.


Hospitals, the report noted, can too easily use state health planning laws "to forestall competitors from entering an incumbent's market. There is considerable evidence that [the] programs can actually increase prices by fostering anti-competitive barriers to entry."

The report bolsters contentions by those who are trying to abolish the board in Illinois, as at least a dozen states have done. More are considering changes or have reduced regulation.

(Maryland has an extensive certificate-of-need [CON] program, which reviews many hospital expansion projects, but some Maryland projects are exempt from review if the hospital promises not to raise rates to pay for them. Beyond getting a CON to add beds, hospitals need it to begin some high-cost programs, such as cardiac surgery.

(In 1999, the General Assembly directed the Maryland Health Care Commission, which administers the certificate program, to review it. The commission's study, completed in 2001, concluded that the certificate program should continue, but led the commission to modify some CON rules.)

David Hyman, special counsel at the FTC and an author of the report, said such programs are not effective and interfere with sound decisions by making lobbying part of the process.

In Illinois, the nine-member health facilities board's records show politically influential lobbyists and lawyers get deeply involved with expansion proposals.

After the report's release, Democratic Gov. Rod R. Blagojevich said he thinks the state should look at doing away with the board, and that he is "looking at that as a serious option."

He said he shares the concerns that the certificate-of-need process is anti-competitive and fails to contain costs, and additionally worries that it is open to "mischief."


Still, the Illinois Hospital Association, which represents 200 hospitals in the state, favors keeping health planning laws, in part, to protect hospitals that serve significant numbers of poor and uninsured.

The report, which covers an array of health care competition and regulation, comes after nearly two years of hearings, testimony and research from more than 300 participants in the health care industry.

Among its other recommendations, the Justice Department and FTC report urges that doctors and hospitals be paid based on performance, while various licensing standards for medical-care providers should be implemented to improve quality.

The Chicago Tribune is a Tribune Publishing newspaper. Tribune reporter Christi Parsons and Sun staff writer M. William Salganik contributed to this article.