House HWI COPN Task Force

October 25, 2006

The second meeting of the House of Delegates Health, Welfare, and Institutions Certificate of Public Need (COPN) Task Force was held in Richmond.

The task force was established to review past Joint Commission on Health Care COPN studies, the 2004 Federal Trade Commission/Department of Justice Report on COPN, relevant information on COPN in other states; examine the role of the local Health Service Agencies (HSA) in the COPN process; and receive input from interested stakeholders as to the needed changes in Virginia's COPN law or regulatory process.

Status of COPN Programs in Other States

Staff made a presentation on the current status of Certificate of Need programs in other states. Thirty-six states and the District of Columbia were found to have Certificate of Need programs currently in effect. Fourteen states have repealed Certificate of Need laws since the 1980s. These programs were found to vary widely in nature and scope, making comparisons and generalizations difficult. Moreover, the fact that record-keeping systems and other measurement devices were eliminated along with the programs make analysis of states' post Certificate of Need experiences difficult.

Public Comment

During the public comment period, several interested parties spoke about issues related to the COPN program, and recommendations for revising or improving the program. Major issues included the cost of the program, including additional time spent in organizing and processing applications and legal fees; the impact of for-profit versus not-for-profit status; ability to provide for indigent care; and variation in the COPN application process by region across the state with the potential need for a more detailed reporting process. Suggestions and recommendations offered by the speakers included:

• Reconsidering the efficiency and effectiveness of the local review process.
• Assessing the value of an electronic application process.
• Regularly assessing the COPN with regard to technology.

November 14, 2006

The task force held its third meeting on November 14, 2006, with Delegate Purkey as chair. Four speakers were invited to the session to provide information regarding Virginia's Hospitals and Certificate of Public Need (COPN) in the Commonwealth.

Presentations

Financial Status of Virginia’s Hospitals

Dick Walker - Virginia Health Information (VHI)
Mr. Walker gave a presentation on the financial status of selected hospitals in Virginia. VHI is a nonprofit, public/private partnership charged with collecting, analyzing and disseminating health care data for the purpose of promoting informed decision-making by Virginia consumers and purchasers and enhancing the quality of health care delivery within the state. VHI works through contracts with the State Health Commissioner, private organizations and sales and service entities. The organization ranks health care providers on a number of indicators, including financial data. COPN licensure survey data was added in 1998. Mr. Walker discussed net worth trends, asset trends, income trends, profit margins trends and total margin trends in Virginia hospitals.

Strategic Health Care Trends

Frederick Hessler - Managing Director, Health Care Group
Frederick Hessler, Managing Director, Health Care Group, Citigroup, gave a presentation on strategic health care trends in the United States, as well as discussed the major environmental trends that will affect health care over the next 3 to 5 years, including pressure on payment sources, slowing and shifting demands, quality and patient safety initiatives, increasingly competitive forces, resource constraints and escalating headline risks. Mr. Hessler also presented information drawn from a study facilitated by Citigroup, evaluating health care provider performance for approximately one quarter of all U.S. hospitals. Mr. Hessler concluded that while margins are improving overall, the scale of health care systems appears to be driving the strongest results. Further, the study found, scale affects supply costs of hospitals, generates a cost of capital advantage and may create a sustainable advantage for health care systems, allowing the provider to achieve pricing leverage and revenue diversification, and to manage resource constraints.

For-Profit vs. Not-For-Profit

Mark Haskins, Virginia Department of Taxation
Mr. Haskins, offered a comparison of nonprofit and for-profit status for hospitals, including state and federal income tax treatment, charitable purpose exceptions, and sales and use exemptions.

Recommendations Regarding Changes to Certification of Public Need Laws

Eric Bodin, Director of the Virginia Department of Health's COPN Program
Mr. Bodin offered specific recommendations regarding Virginia's Certificate of Public Need laws. These recommendations can be viewed in their entirety on the COPN study website, at http://dls.state.va.us/GROUPS/COPN/meetings/111406/materials.htm.

Next Meeting

The next meeting of the HWI Certificate of Public Need task force will be held December 15, 2006, in Richmond.

Chairman:
The Hon. Harry R. Purkey

For information, contact:
Sarah Stanton and Ellen Weston, DLS Staff

Website:
http://dls.state.va.us/COPN.htm

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