GOP lawmaker seeks to loosen requirements for health care expansions

Posted Feb. 18, 2013, at 2:56 p.m.
Last modified Feb. 19, 2013, at 5:32 p.m.
A proposed expansion at EMMC in Bangor would eliminate this single-story structure and install a new tower covering the turnaround and grassy area in the foreground. EMMC had to receive approval under the Certificate of Need program before it could undertake the expansion it's planning. Rep. Richard Malaby, R-Hancock, is proposing legislation that would repeal the Certificate of Need requirements.
A proposed expansion at EMMC in Bangor would eliminate this single-story structure and install a new tower covering the turnaround and grassy area in the foreground. EMMC had to receive approval under the Certificate of Need program before it could undertake the expansion it's planning. Rep. Richard Malaby, R-Hancock, is proposing legislation that would repeal the Certificate of Need requirements. Buy Photo
The $322 million, 192-bed, MaineGeneral Medical Center is expected to open in fall 2013. MaineGeneral received Certificate of Need approval from the state in 2010 to construct the regional facility, which will combine MaineGeneral campuses in Augusta and Waterville.
The $322 million, 192-bed, MaineGeneral Medical Center is expected to open in fall 2013. MaineGeneral received Certificate of Need approval from the state in 2010 to construct the regional facility, which will combine MaineGeneral campuses in Augusta and Waterville. Buy Photo
Rep. Richard Malaby
Rep. Richard Malaby

AUGUSTA, Maine — Lawmakers on Thursday will hear from advocates on both sides of a familiar debate over hospital expansions and the introduction of new services in the state’s health care industry.

A Republican legislator from Hancock will make a pitch to the Legislature’s Health and Human Services Committee to roll back the state’s Certificate of Need program, which closely regulates the expansion of hospitals and other health care facilities in Maine. The chief lobbying association for Maine’s hospitals, the Maine Hospital Association, will oppose the measure.

Rep. Richard Malaby is sponsoring LD 162, which would repeal the key state laws that require hospitals and other health care providers to receive state approval before they install major pieces of new equipment, undertake expansions, introduce new services and add to the number of hospital beds.

Malaby says that level of regulation stifles free-market competition in health care that could ultimately lower costs and ensure that Maine residents have access to the latest medical developments.

“I feel philosophically that hospitals [and] ambulatory surgical centers should be competing and improving their product and maybe, through competition, bringing down costs for consumers,” he said.

Under the Certificate of Need program, officials at the state Department of Health and Human Services review proposals for major hospital expansions and the construction of new facilities to determine whether there’s need for the added services and that the services aren’t already offered at nearby facilities. They also require that new health care facilities serve all patients in a geographic area, rather than only those with private health insurance.

The idea is to rein in overall health care spending in Maine by preventing duplication of services and excess capacity that makes it unsustainable for health care facilities to offer needed services, said Trish Riley, who developed much of Maine’s Certificate of Need program while serving as health policy adviser to former Gov. John Baldacci. Maine’s per-capita spending on health care was fifth highest in the nation in 2009, according to the Kaiser Family Foundation.

“We know that supply drives demand. If you have a hospital bed, it gets filled. If you have a piece of equipment, it gets used,” Riley said. “You want all the services you need, but not more. You don’t want to escalate health care spending unnecessarily.”

Through the Certificate of Need process Eastern Maine Medical Center received approval for a $250 million expansion in 2008. The project was put on hold until late last year. In addition to a new tower, the plan calls for more than a dozen operating suites, increasing the number of private patient rooms, updating cardiac and obstetrics services, and relocating the neonatal intensive care unit.

The tower project is one of the most ambitious tackled by a Maine hospital in recent years. It’s smaller than MaineGeneral’s pursuit of a $300-million-plus hospital in Augusta, but dwarfs Maine Medical Center’s plan for a $40 million expansion and update of several operating rooms. Also in Portland, Mercy Hospital has been shifting its services to a new campus on the Fore River, a multiyear project pegged at $162 million.

The federal government began requiring and funding Certificate of Need programs in 1974. The funding stream and associated requirements ended in 1987, but 36 states have maintained their Certificate of Need requirements, according to the National Conference of State Legislatures.

“Certificate of Need is one tool, and an imperfect one, to get a more planned, thoughtful health system that works for everybody in the state,” Riley said.

The state’s Certificate of Need program has become a familiar target for Republicans in the Maine Legislature. Former Rep. Jonathan McKane, R-Newcastle, introduced a proposal identical to Malaby’s two years ago when Republicans controlled both legislative chambers. The final bill stopped short of repealing Certificate of Need, but it exempted a wider range of health care facility investments from state approval.

McKane’s legislation, for example, raised the minimum spending threshold for new medical equipment before state approval is required to $3.2 million from $1.6 million. It also raised the spending threshold for facility improvements to $10 million from $3.1 million.

The Maine Hospital Association two years ago opposed repealing the Certificate of Need program, but pushed for legislation to raise some of those threshold spending amounts, said Jeffrey Austin, the association’s vice president of government affairs and communications.

The association also will oppose Malaby’s repeal bill, Austin said.

“We want the regulation to be as easy to understand and as easy to navigate as possible at the micro level. At the macro level, we do still think that the policy has merit,” he said. “There can be an oversupply of a service, and that additional supply generates its own demand, unnecessarily driving up health care costs. Having something to try to prevent that oversupply is, we think, meritorious.”

The Certificate of Need approval process is onerous, expensive and anti-competitive, Malaby said. The process, he said, can shut a small-scale health care facility out of the market for certain services because state officials might not allow the facility to invest in new equipment so it can provide more services to its patients.

“I don’t mean to imply that our hospitals are overcharging,” Malaby said. “I just think competition’s a good thing, and the state is not well suited to making some of these decisions. I would rather trust the marketplace.”

But not allowing a small health facility to invest in an X-ray machine could help to control overall health system costs, said Riley.

“If you take volume out of the hospital and put it in these smaller places, the hospital still has to operate that machine,” she said. “And if they’re spreading the cost to 100 patients, rather than 1,000 patients, the cost to those patients goes up.”

And the insurance companies paying for those procedures make up for higher costs by raising premiums, Riley said.

Austin of the Maine Hospital Association said the changes made to the Certificate of Need program two years ago have made it easier for smaller health care facilities to offer new services and install new equipment.

“It is less credible to say that a small provider can’t come in because of Certificate of Need, because we doubled, tripled and in some cases, way beyond doubled and tripled the threshold,” he said.

Malaby said he’s not optimistic his bill will pass this year, especially now that Democrats hold majorities in both chambers of the Legislature. But it’s still a debate worth having, he said.

Sen. Margaret Craven, a Lewiston Democrat who chairs the Health and Human Services Committee that will hear Malaby’s proposal Thursday, said she’s opposed to eliminating the Certificate of Need program. There’s no indication there’s a lack of needed medical services in Maine, she said, and dispensing with the Certificate of Need requirements could open the door to new for-profit hospitals that serve limited populations and endanger the state’s existing hospitals, she said.

“Health care does not fit into the free market,” Craven said. “Our hospitals and other providers in this state have already built their organizations within the confines of the Certificate of Need.”

John Martins, a spokesman for the Maine Department of Health and Human Services, said his agency hasn’t yet taken a position on Malaby’s bill. A spokeswoman for Gov. Paul LePage declined to comment on the legislation.

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