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Sunday, 12 April 2015 22:00

CON regs act to control health care costs in Michigan, new analysis shows

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Certificate-of-need regulations in Michigan help to contain health care costs, although they tend to concentrate some regulated medical services into the hands of fewer care providers, according to a new analysis by a business-labor coalition.

That concentration and the potential limits on competition for medical services aren’t necessarily bad, given that research shows that care providers who do the most procedures tend to do them at a higher quality level, said Bret Jackson, president of the Novi-based Economic Alliance for Michigan.

The analysis by the Economic Alliance — which comes as some lawmakers in Lansing prepare to push to repeal or to significantly curtail CON — suggests that the regulations do help to drive efficiency by enabling hospitals to optimize costs for certain medical procedures, Jackson said.

“It allows those facilities to deliver those services on a lower cost per procedure,” he said. “We’re concentrating the volume. In other states where they have a lot of different providers to choose from, the volume is diluted among different facilities and therefore they can’t have the same efficiency that the Michigan programs do.

“As long as we make sure that there is adequate access to these procedures, which I believe we do have in Michigan, then we’re kind of getting the biggest bang for our buck.”

The Economic Alliance conducted the analysis using Medicare and Medicaid data from 2012. The analysis shows that average charges in Michigan for CON-regulated procedures and medical treatments were 12 percent to 17 percent less for the same diagnosis compared to the national average and to rates in non-CON states.

The analysis looked at the costs for joint replacement surgery, cardiac catheterization, MRI scans and major heart procedures, plus charges to treat heart attacks, stroke, COPD and hypertension.

For example, the charge for an MRI for Medicare and Medicaid patients averaged about $2,000 in Michigan in 2012, versus about $2,500 in all states and nearly $3,000 in non-CON states, according to the Economic Alliance analysis. Michigan hospitals charged an average of $40,000 for a cardiac catheterization, which compares to $60,000 in all states and more than $70,000 in all non-CON states.

The statistics in the analysis affirm the view that health care is “totally contrary to a lot of what supporters of the free-market system believe — that competition drives down costs,” Jackson said.

“In this case, it shows health care works on a different economic dynamic,” he said. “The data suggests in this particular case that it is beneficial for the business community and health care purchasers in general to support this particular program because of its cost benefits and, we believe, the quality benefits that we’re going to continue to try and demonstrate.”

The Economic Alliance will surely use the data in the near future to advocate support for CON as it again comes under scrutiny in the state Legislature.

Critics contend that CON regulations serve as an impediment to competition in health care, protect some hospitals’ ability to essentially monopolize a medical service within a market and act to delay the deployment of new medical technology.

One legislator in the state House, Republican Rep. Cindy Gamrat of Allegan County, plans to push for repeal. Gamrat in late February wrote on her legislative website that she’s seeking co-sponsors for what she calls the “Eliminate Michigan Death Panels Bill” that would repeal CON.

Rep. Gamrat considers the state Certificate of Need Commission “an appointed panel that determines whether or not a number of hospital services such as Cardiac Cath labs and MRIs can be provided at various locations around the state.”

“The CON is perpetuated by large hospital lobbyists to prevent free-market competition,” she wrote.

State Sen. Mike Shirkey, a first-term Republican from Jackson who served two terms in the House and now chairs the Senate Health Policy Committee, said he’s also likely to introduce a bill for repeal. The bill “primarily would be the launching point for the process” to take a hard look at CON.

A past board chair at Allegiance Health System in Jackson, Sen. Shirkey views CON “at the highest level … as an antiquated tool that may in fact have had a use at one time.”

“I’m not quite ready to say that it should be completely deep-sixed, if you will, but I do think it deserves a pretty rigorous review,” he said. “If I was a betting man, I would say the likelihood of a whole, complete, 100-percent repeal would be not necessarily a high probability, but I think (there’s) a very high probability of rather dramatic changes.”

Designed to avoid the costly duplication of medical services within a market, CON regulations require care providers to meet volume and quality standards before initiating a medical service or making a major capital investment. To earn CON approval from the Michigan Department of Community Health, a care provider must demonstrate an existing market need by meeting minimum volume requirements, as well as prove it can meet quality standards.

The 11-member CON Commission appointed by the governor sets the standards and reviews each one every three years.

CON came under the legislative spotlight last year when Flint-based McLaren Health Care Inc. sought to secure legislative approval to build a new $300 million hospital north of Detroit.

The legislation, which died in the state Senate, included narrowly written language that would have allowed McLaren Health Care to develop a new hospital in Clarkston in northern Oakland County and relocate 200 beds from McLaren Oakland Hospital in Pontiac.

Opponents of the project say the additional hospital beds were not needed in a market that already had too many and where hospitals had low occupancy rates. McLaren, which argued that the new hospital was needed to serve a growing community, pushed for the legislation after the Michigan Department of Community Health denied its CON application and a subsequent court ruling failed to overturn the decision.

A legislative panel looked at CON in 2013 and opted at that time not to make any changes.

Andy Johnston, vice president of government affairs at the Grand Rapids Area Chamber of Commerce, hopes any subsequent review of CON focuses on improving the process. The Grand Rapids Area Chamber is part of the statewide coalition, The Friends of Certificate of Need, that consists of business and health care interests.

“This is one of those issues where any change affects the entire system, and probably profoundly,” Johnston said. “We’re always ready to have a discussion or debate about the process and see if it needs improvement because we want to make sure that it’s doing what it sets out to do.”

Read 2682 times Last modified on Monday, 13 April 2015 11:08

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