Category Archives: Health care

How Hospitals Can Take the Lead in Economic Development

exxon-mobil

The Exxon Mobil facility

by James A. Bacon

As budgetary pressures continue to squeeze federal spending in the Washington metropolitan area, who will assume the mantle of economic growth in the region? An unlikely champion has emerged — Inova Health Systems, Northern Virginia’s dominant health system. The company announced yesterday its intention to lease and ultimately purchase Exxon Mobil’s 117-acre campus to house a world-class facility dedicated to genomics and personalized medicine.

The story is fascinating in many ways: first, for the ambitious thinking behind the venture, which sounds like it has a legitimate shot at success; and second, for what it says about the economic clout of Virginia’s major health care systems.

Genomics and personalized medicine is one of the hottest areas of medical science today. The human genome contains about 23,000 genes, the variations in which account for much of the difference in how individuals respond to chemotherapy-based cancer treatment. The goal is to tailor treatments for a patient’s specific genome — to “personalize” medicine — to attack cancer cells while minimizing side effects.

Under the vision laid out by Inova CEO J. Knox Singleton, the health system will establish a world-class facility, akin to the prestigious Mayo Clinic, that can recruit top physicians and draw patients from around the country, according to the Washington Post.

Inova has several advantages. First, the Washington region is a prestigious, world-class metropolitan area, which should aid in recruiting world-class scientific talent. Second, Inova’s flagship hospital, Inova Fairfax Hospital, is situated right across Gallows Road from Exxon Mobil, a campus assessed at $193 million in value. Third, while not in the same biotech league as Boston, San Francisco or San Diego, Northern Virginia does have significant assets, most notably the Howard Hughes Medical Institute. (See a list of biotech assets.) Fourth and most intriguingly, the data-intensive field of genomics could draw upon the region’s strength in IT. Writes the Post:

Singleton said the use of translational medicine to develop treatments for cancer and other diseases could be accelerated by taking advantage of Northern Virginia’s expertise in cloud computing and data analytics.

“The beauty of Northern Virginia is we’re building in sort of a greenfield when it comes to this personalized medicine, genomics research,” Singleton said. “But when you look at the big data and bioinformatics capacity, there are a ton of companies in Northern Virginia who are extremely sophisticated and well-advanced; they’ve just been working on cybersecurity or weather forecasting.”

Oh, and there’s one more advantage Inova brings to the venture: It is an incredibly profitable non-profit company. In 2013 (the most recent figures I could find), Inova generated operating income of $132 million. That profit is non-taxable. Not only can Inova make philanthropic appeals to the community — the Peterson Family Foundation also announced yesterday a $10 million gift to recruit cancer specialists — it can tap the cash thrown off by its own operations. Nobody else, not even the Commonwealth of Virginia, has that kind of money to pump into an economic development project.

It remains to be seen whether the state will contribute to the effort. A key component of the project will be a new medical school. The Post notes that Singleton has not yet struck a deal with a college or university to operate the school. Governor Terry McAuliffe told the Post the state had not been approached for funding, and he did not expect to provide it. “This is all being done privately, which is great.” But you can bet your bottom dollar that George Mason University would love to get into the medical school business, which could require some level of state support. It will be interesting to see how this plays out.

As an aside, there are parallels between Inova’s plans and the Virginia Tech Carilion School of Medicine, a partnership between Carilion Health System in Roanoke and Virginia Tech, which combines “Virginia Tech’s world-class strength in basic sciences, bioinformatics, and engineering with Carilion Clinic’s highly experienced medical staff and rich history in medical education to train the next generation of physician thought leaders.” The medical school in Roanoke, which averages 42 students, had a $59 million bond package included in a state bond issue. Don’t think that Singleton hasn’t considered that precedent.

As promising as the project sounds, caution is warranted. Inova made a similar splash in 2009 when it announced plans for a $200 million Ignite Institute, which also had a focus on genomics and personalized medicine. That project fizzled, and Ignite moved to Philadelphia instead. As GenomeWeb explained in a 2010 article:

That plan collapsed after Inova Health Systems withdrew a commitment to provide $25 million over five years to the institute, citing in a statement, “The scope and scale of the project and the time needed for capital development in the current market.” Inova’s pullout, in turn, prompted Fairfax County to retreat from its own plan to partially finance the permanent facility by issuing up to $150 million in Fairfax County Economic Development Authority industrial revenue bonds.

Hopefully, Inova has learned from the experience, and the financial chemistry will be different this time.

Best and Worst from the 2015 General Assembly

by James A. Bacon

thumbs_upThe best: crowdfunding. A bill submitted by Del. Scott Taylor, R-Virginia Beach, will make it easier for entrepreneurs to raise money for start-up businesses through crowdfunding. The bill creates an exemption from the state Securities Act applying to the first $2 million raised per year. A business still could not raise more than $10,000 from any single purchaser unless the purchaser is an accredited investor.

States Taylor: “The greatest challenge that start-ups with good ideas face is finding the capital to grow. ‘Crowdfunding’ has grown to a multi-billion dollar industry that lets entrepreneurs make their case to small investors and get their ideas off the ground. This legislation will make it easier for Virginians to invest in promising Virginia start-ups, creating a culture of entrepreneurship and more good-paying jobs.”

The bill passed the House of Delegates on a 99 to 0 vote.

pukeworthyThe worst: Selective COPN rollback: The Certificate of Public Need (COPN) law, which regulates investment in new medical facilities and expensive equipment, protects hospitals from competition — justifiable only as a way to offset hospitals’ significant obligation to provide indigent care. A bill submitted by Bobby Orrock, R-Thornburg, would roll back the law in certain instances.

The bill would provide exemptions for existing general hospitals and psychiatric hospitals when adding non-nursing home beds, exemptions for certain hospitals adding open heart surgery, and exemptions for certain hospitals adding neonatal care facilities.

Less regulation is a good thing, right? Yes, when applied to everyone equally. COPN review adds unnecessary cost and makes hospitals less responsive to market conditions. But less regulation is NOT a good thing when it serves to advantage certain players over others. Please note: The exemptions apply only to existing hospitals — not to anyone trying to enter the market. In effect, it lifts the burden of regulation for established providers while maintaining it for anyone who wants to compete.

Second, the bill provides arbitrary conditions on who qualifies for the exemption. Hospitals adding open heart surgery must have “at least 1,100 adult inpatient or outpatient cardiac catheterizations, including at least 400 therapeutic catheterizations, or discharged at least 800 patients with the principal diagnosis of ischemic heart disease during the 12 months immediately preceding such registration.” What? Is there any medical justification for such a restriction, or has it been inserted into the bill to apply to one particular hospital only? Who is that hospital? People should demand to know.

The bill also exempts “intermediate- or specialty-level neonatal special care services at an existing medical care facility that registers the new service and delivered more than 1,000 infants in the 12 months immediately preceding such registration.” Really? What’s the justification for that exemption? Who’s the beneficiary here? How about a little transparency?

Orrock’s bill was passed unanimously by the House Health, Welfare and Institutions Committee.

The Strange Story of Health Diagnostic Laboratory

HDL's Mallory before her fall.

HDL’s Mallory before her fall.

By Peter Galuszka

The biggest problem facing the health care industry in Virginia and the rest of the country isn’t Obamacare or the lack of new medical discoveries. It the lack of transparency that hides what is really going on with pricing tests, drugs and hospital and doctors’ fees. Big Insurance and Big and Small Pharma cut secret deals. We are all affected.

I’ve been wanting to blog about this – especially after Jim Bacon’s recent post on the supposed tech trend in health care – but I wanted to wait until a story I’ve been working on for a few weeks was posted at Style Weekly, where I am a contributing editor.

In it, I explore the strange story of Health Diagnostic Laboratory, a famed Richmond start-up that went from zero to $383 million in revenues and 800 employees in a few short years. The firm said it was developing advanced bio-marker tests that could predict heart disease and diabetes long before they took root. HDL’s officials thought it would transform the $1.6 trillion health care industry.

Richmond’s business elite applauded HDL founder Tonya Mallory, a woman who grew up just north of the city and had the strong personality and drive to create the HDL behemoth. Badly wanting a high tech champion in a not-so high tech town, the city’s boosters did much to publicize HDL and Mallory, believing they could draw in more startups.

The story was too good to be true. It start to deflate last summer when the federal government noted that HDL was one of several testing labs being probed for paying doctors $17 for using HDL tests for Medicare patients when Medicare authorized $3 per test. Mallory resigned Dept. 23. Several lawsuits by Mallory’s former employer, Cigna health insurance and another have accused HDL of fraud. HDL has responded in court.

One legal picture suggests that HDL wasn’t a true tech startup but a new firm that stole intellectual property and sales staff. HDL says no, but its new leader Joe McConnell has taken steps to reform sales and marketing and is said to be working with the U.S. Department of Justice to settle a federal investigation.

The HDL affair raises issues about the inside marketing and apparent payoffs that are the biggest problem the health care industry faces. It doesn’t matter what kind of “market magic” combined with new technology comes up if something like this keeps happening.

This is all the more reason for a universal payer system. That may be “socialized” medicine but in my opinion it is the only logical way to go.

Medical Crush

surdak

Chris Surdak

by James A. Bacon

One day historians will look back upon the healthcare debate in the United States and marvel at how oblivious the politicians, lobbyists and pundits were to the massively disruptive changes to come. Congress battling over Obamacare and Virginia legislators grappling over Medicaid expansion will appear to future generations like so many dinosaurs hunting and munching and rutting, totally unaware that a meteor bearing down on them would bring them all to extinction.

In the view of futurist Chris Surdak, author of “Data Crush: How the Information Tidal Wave Is Driving New Business Opportunities,” the U.S. health care system is beyond reform. Massively entrenched special interests — physicians, hospitals, pharmaceutical companies, insurance companies, Medicare and Medicare recipients —  are deeply wedded to the status quo. “They are politically very powerful,” he tells Bacon’s Rebellion, “and rhetoric is all about self-preservation and self propagation. Who wants to see an unlicensed doctor? Who is against helping sick people?”

But that system is so dysfunctional and resistant to change that it will collapse as entirely new medical practice models emerge. Writing in HP Matter: The Healthcare Issue, Surdak identifies game-changing technologies that will give rise to new medical products and services that will deliver such better outcomes at less cost that they will render the old system obsolete.

New sensors are making it possible to track an ever-growing array of medical markers — temperature, pulse, blood pressure, glucose, cholesterol and virtually any kind of molecular compound — around the clock in real time, and then to transmit that data to central repositories where it can be subjected to predictive analytics. Soon, writes Surdak:

When you or I feel a bit sick it will be completely normal for us to stop by a vending machine at the mall, buy a disposable, $5 plastic cube (like today’s Square credit card reader), lick it, and then get an accurate diagnosis of our ailment in 10 seconds or less.  We’ll then get a coupon for the best treatment for that ailment and an invitation to consult with a five-star specialist in that condition, who practices medicine on a different continent. This will all be normal to us by 2020.

Existing health care providers will avail themselves of these technologies to make incremental improvements to the quality and cost of medical care, but they have no incentive to disrupt the system in which they are so heavily invested. Real change will come from entrepreneurs who build new business models around the technology. Healthcare incumbents can stifle domestic competition — although it is interesting to see how big players like drugstore chains are planning to disrupt the urgent care and diagnostics businesses — but they can’t quash competition from abroad.

Medical tourism, a large and growing industry, will explode, Surdak predicts. Instead of traveling outside the country for big-ticket procedures like open-heart surgery or kidney transplants, patients will consult with their doctors via FaceTime or Skype.

With telemedicine, it won’t matter where I live, or where my provider practices; we will simply log into a consultation session online. As a result, I will seek out the very best providers wherever they are in the world, and they in turn will work to market directly to me through online exchanges not unlike Angie’s List or eBay. This transformation is already taking place, and doctors who do not join such exchanges immediately will, again, find themselves providing commodity services to the least-common denominators in the market.

Traditionally, incumbent businesses have used their power to influence laws and regulations to protect themselves from competition. Change is moving so fast, however, that the politicians and regulators won’t be able to keep up, Surdak says. Much as Uber disrupts the transportation-for-hire industry by entering a market, developing a constituency and then asking for regulatory permission, the new wave of medical providers will develop powerful constituencies — new business ecosystems and, most importantly, happy patients — before the incumbents can shut them down.

If Surdak is right, and I think he might be, there will be a huge reshuffling of winners and losers. The biggest winners will be patients, who will get better medical treatment at lower cost, and the new wave of medical enterprises. The losers will be hospitals, insurers and physicians wedded to the status quo. If they don’t adapt, they will go extinct.

Insofar as state and federal governments pay for half the tab for the nation’s healthcare, governments will be big winners, too. The changes Surdak predicts could bend the medical cost curve radically downwards. Tens of trillions of dollars in future Medicare and Medicaid liabilities could evaporate. Boomergeddon will never arrive, and I’ll have to write a groveling apology.

I asked Surdak if there is anything that government can do to hasten medical disruption, especially at the state level. He suggested that we could get to work dismantling the barriers to change — professional licensure requirements, Certificate of Need regulation, mandated medical benefits — by which vested interests protect themselves. But from his Olympian perspective, he didn’t seem to think it really mattered. Disruption is coming regardless.

From a Virginia-centric perspective, I think it does matter. I draw an analogy with the deregulation of the banking industry in the 1980s. North Carolina got the jump on Virginia, enacting deregulation a couple of years before Virginia did. North Carolina banks started the process of consolidation and rationalization earlier than Virginia banks, eventually growing big enough to swallow the Virginia banks whole. Today, banking is a pillar of the North Carolina economy, not of Virginia’s. Similarly, if Virginia medical institutions are subjected to the full force of Surdakian disruption earlier than their peers in other states, they will have more time to adapt and innovate. They could emerge from the ashes stronger than before.

Will Virginians take up the challenge? I’m not optimistic. We don’t call ourselves the “Old” Dominion for nothing. But you never know. Medical miracles occasionally do happen.

Interview: McAuliffe’s Economic Goals

 maurice jonesBy Peter Galuszka

For a glimpse of where the administration of Gov. Terry McAuliffe is heading, here’s an interview I did with Maurice Jones, the secretary of commerce and trade that was published in Richmond’s Style Weekly.

Jones, a graduate of Hampden-Sydney College and University of Virginia law, is a former Rhodes Scholar who had been a deputy secretary of the U.S. Department of Housing and Urban Development under President Barack Obama. Before that, he was publisher of The Virginian-Pilot, which owns Style.

According to Jones, McAuliffe is big on jobs creation, corporate recruitment and upgrading education, especially at the community college and jobs-training levels. Virginia is doing poorly in economic growth, coming in recently at No. 48, ahead of only Maryland and the District of Columbia which, like Virginia have been hit hard by federal spending cuts.

Jones says he’s been traveling overseas a lot in his first year in office. Doing so helped land the $2 billion paper with Shandong Tranlin in Chesterfield County. The project, which will create 2,000 jobs, is the largest single investment by the Chinese in the U.S. McAuliffe also backs the highly controversial $5 billion Atlantic Coast Pipeline planned by Dominion because its natural gas should spawn badly-needed industrial growth in poor counties near the North Carolina border.

Read more, read here.

(Note: I have a new business blog going at Style Weekly called “The Deal.” Find it on Style’s webpage —   www.styleweekly.com)

Is U.Va. Possessed by the Devil?

the exorcistBy Peter Galuszka

Over the past weeks there’s been plenty of blogging about Rolling Stone’s coverage of the University of Virginia and lots of comment by two conservatives who believe there is an evil “hook up” culture that involves casual sex and today’s loss of morality.

Well, I’ve been feeling sort of down recently (maybe post holiday-related), so to cheer myself up, I got an old paperback copy of William Peter Blatty’s “The Exorcist.”

Imagine what I found! The “hook-up” culture has been around for centuries and may involve possession by the Devil!

Consider this passage:

“The nuns at the convent at Lille. Possessed. In early-seventeenth-century France. They’d confessed to their exorcists that while helpless in the state of possession, they had regularly attended Satanic orgies; had regularly varied their erotic fare; Mondays and Tuesdays, heterosexual copulation; Thursdays, sodomy, fellatio and cunnilingus, with homosexual partners; Saturday, bestiality with domestic animals and dragons. And dragons! The Jesuit shook his head.”

So that might be the problem — and the solution — up in Charlottesville. I suggest we send busloads of Jesuit priests to do what is necessary.

Jim Bacon and Reed Fawell could ride in the first bus.

The Gift of Care Giving

SONY DSC

B.K. Fulton

by James A. Bacon

B.K. Fulton, a senior Verizon Virginia executive, grew up in Hampton with his younger sister Shauna. As a baby, Shauna seemed normal. She developed like any other child. Then, around two years old, she began regressing. She lost the ability to walk. Her verbal skills disappeared. No doctor could tell her family what was wrong until she reached the age of 12, when she was diagnosed with Rett Syndrome, a developmental disorder that afflicts about one in 10,000 to 15,000 girls globally.

As a boy, Fulton was called upon to help take care of his disabled sister. He helped feed her, watch after her, understand her efforts to communicate, and anticipate her needs. “I had to come home after school and help my sister,” he told a small gathering at bbgb bookstore in Carytown last night. Some kids might have been resentful of the obligation. But Fulton responded positively. “Shauna’s life was a blessing. Caring for her and showing her love helped me be a better man.”

Fulton retains keen memories of one day when a bunch of kids in the neighborhood asked him to come out and play. He said he would, but only if he could bring his sister with him — and if everyone helped take care of her. And that’s what they did. It was a liberating experience, and it inspired Fulton at age 16 to write a poem about it. Today, more than three decades later, the memories are still vivid. The poem about that special day became the inspiration for a just-published children’s book, “Shauna.”

The number of people diagnosed with Rett Syndrome runs in the hundreds, but he wrote the book for a broader audience, Fulton said. Thousands, if not millions, of people are called upon to become caretakers of people with disabilities. His message to them is to view the experience not as a duty or obligation but as a blessing. Experience the love. Grow from the experience.

One of the things Shauna taught him was to be attentive to the needs of others. Learning to listen and read the signals made him a better person– and a better businessman. “That skill — knowing how to listen — has benefited me in my career,” he said.

The reaction to the book by care givers has been overwhelmingly positive, Fulton said. “It helps them think differently, to appreciate what they have. … We need to enjoy every minute of every day.”

Shauna, now 42, still lives with her parents in Hampton, and she’s still a big part of Fulton’s life.

Virginia’s COPN Law Ensures Access to Health Care for All Virginians

connaughtonby Sean Connaughton

In response to your January 5, 2015, opinion, “Certificate of Need: A Bad Idea with Political Staying Power,” Virginia’s Certificate of Public Need law has at its core the recognition that many preconditions for an effective “pro-business” marketplace don’t exist for health care and that a regulatory process designed to ensure that Virginians have access to essential health care services is necessary for the public good. The law has undergone significant reforms through its 40-year existence in Virginia; however, its fundamental role of providing Virginians access to essential and high-value health care remains intact.

Nearly every Virginian is within a 20-mile drive of a hospital, which is staffed 24 hours a day, seven days a week, 365 days a year. These full-service hospitals offer a wide array of services, some are profitable, others are not (oftentimes the profitable services help subsidize the cost of those that are not profitable). They are required to care for all patients regardless of their ability to pay; held to higher quality and safety standards; subsidize the societal costs of training the health care workforce; maintain services 24/7/365; and provide surge capacity to deal with natural or man-made disasters. They also must contend with environmental, labor, occupational health and safety and other regulations that many businesses face, as well as the fact that the major purchasers of health care – Medicaid and Medicare – pay well below the cost of providing care. They do this because their communities depend on them to be there in any situation. One must only look at local, state or national news coverage when a full-service hospital closes or stops offering a specific service in its community to see the public outcry. There are no strong market incentives to provide many essential services, and there is no business case for a new market entrant to treat patients who cannot cover the cost of their care.

Rightly stated, hospitals contribute to the financial burden of caring for Virginia’s low-income uninsured. In 2013, Virginia’s hospitals provided over $628 million in financial assistance. In the face of continued cuts imposed by the Affordable Care Act, sequestration under the Budget Control Act of 2011 and the American Taxpayer Relief Act, one third of Virginia’s hospitals operated in the red last year, before many of these cuts went into effect, and bond rating agencies are forecasting an even bleaker 2015 outlook.

In 2000, the Virginia General Assembly passed a bipartisan law to responsibly deregulate COPN. In phasing out the law, certain protections were put in place to ensure a balanced and controlled approach to adequately address access to essential services and health professions training; disaster preparedness; safety net health care; quality of care oversight and accountability of all health care providers; and market fairness. Unfortunately, lack of funding put the deregulation plan on hold. However, COPN continues to work for Virginians today.

While alternatives to COPN review may be more prevalent now than when the program was enacted, a solution for how best to cover the costs of serving the indigent and uninsured populations has not been provided, and the usefulness of COPN regulation in controlling use of resources remains an important consideration for how the state chooses to ensure access to care for low-income uninsured Virginians. If COPN was to be deregulated, the ability of all Virginians to receive access to vital health care services must remain intact.

The deregulation of other industries has led to public perception of diminished quality services in those fields. We cannot afford to let that happen with health care. We must insure that health care, if deregulated, is done in a responsible manner to protect all Virginians. Reasonable people can disagree about COPN, but no one wants to place the stability of our health care system and access to essential and high-value health care services at risk.

Sean T. Connaughton is president and CEO of the Virginia Hospital & Healthcare Association.

Certificate of Need: A Bad Idea with Political Staying Power

Politically, it's impossible to scrap CON without addressing indigent care.

Politically, it’s impossible to scrap CON without addressing indigent care.

by James A. Bacon

Every so often Virginia undergoes a spasm of skepticism regarding the Certificate of Need (CON) law that subjects proposals for hospital expansions and equipment purchases to regulatory approval. The law gives proof to the oft-heard claim that Virginia is “pro business” — state government protects existing businesses from the challenges of newcomers — and the lie to the idea that the Old Dominion is a champion of economic competition and innovation.

We’re seeing such a spasm right now. Op-ed pieces by free market-friendly writers have been published recently that highlight problems with the law. (For example, the Richmond Times-Dispatch’s Bart Hinkle tackled the subject in November, and the Thomas Jefferson Institute’s Mike Thompson did in late December.)

Both pieces raise excellent points. Hospitals use CON regulations to delay and block encroachment onto their turf. By limiting competition, the regulatory barrier creates capacity shortages that allow hospitals either to charge more or to maximize utilization, thus increasing profitability. Hinkle asks a logical question: If Virginia Republicans believe their own propaganda and really, truly support free market economics, which they invoke in their opposition to the expansion of Obamacare, why don’t they scrap Virginia’s COPN law?

The answer, of course, is that Virginia’s hospital lobby is extremely influential in Virginia. In the 2014-2015 reporting period, the health care industry (which includes hospitals, physicians and other health care providers) contributed $2.6 million to Virginia PACs and political candidates — surpassed only by the real estate and financial sectors, according to the Virginia Public Access Project. And the hospital industry, which serves the interest of existing industry players, not potential newcomers, fights to keep the law.

No one justifies the law anymore based upon its original pretext, which was that excessive spending on capital expansion drove up the cost of health care. Rather, they argue just the opposite: regulatory-induced scarcity helps prop up hospital profits. And profits need propping considering all the indigent patients that hospitals are expected to care for.

Indeed, the hospitals’ argument appears more potent than ever since General Assembly Republicans stymied Medicaid expansion in Virginia as part of their larger opposition to Obamacare. While blocking Medicaid is entirely justifiable on a number of grounds, it does create a problem for Virginia’s hospital industry. On the logic that Medicaid expansion would mean fewer indigent patients, Obamacare cuts federal payments to hospitals with indigent-care burdens.  Thus, Virginia hospitals are stuck with the indigent patients but get no federal support. The Virginia Hospital Association and Healthcare Association (VHHA) can plausibly argue that it needs CON more than ever.

If we’re going to advance the cause of scrapping CON in Virginia, it is insufficient to repeat old, familiar — and politically ineffective — arguments. We need to dig deeper.

Thomas Stratman and Jacob W. Russ with George Mason University’s Mercatus Center made an important contribution to the debate with their July 2014 paper, “Do Certificate-of-Need Laws Increase Indigent Care?” They directly tackled the argument that CON laws create a quid pro quo in which state agencies increase hospital profits in the expectation that hospitals will use the profits to support indigent care. After comparing CON states with non-CON states, they concluded: “The effect of CON programs on indigent care shows no clear pattern using either direct or indirect measures of indigent care. However, consistent with the existing literature, our results suggest that CON programs restrict entry and limit the provision of regulated medical services. For example, CON states have about 13 percent fewer hospital beds per 100,000 persons than non-CON states.”

Of course, local CON defenders could argue that the Old Dominion is an exception to the national rule, so the Stratman-Russ findings do not end the debate. To overcome industry objections to scrapping the CON law, deregulation advocates need to demonstrate that:

  1. CON as practiced here in Virginia leads to less hospital capacity and diagnostic equipment than the marketplace otherwise would support;
  2. Virginia hospitals are more profitable as a result, either because they enjoy higher rates of utilization or they have the market power to charge higher rates; and
  3. If deprived of protected profits, Virginia hospitals still would have the financial wherewithal to treat indigent patients.

I am fairly certain that the first two propositions are true but am less confident of the third. It’s fine to argue economic theory (I do it all the time), but without strong evidence to assure people that hospital finances won’t be brutalized by a repeal of CON, it will be very difficult to refute VHHA claims.

The other element missing from the CON debate in Virginia is a compelling vision of what a health care industry driven by competition and innovation would look like. For all intents, the debate over Obamacare is not a debate about how to deliver better health care at lower cost but about who pays. It’s a zero sum game. Some people pay more, others pay less. The number of losers offset the number of winners. What we need is a win-win vision in which the health care industry reaps the same level of gains in economic productivity seen in the rest of the economy. To achieve those gains, the hospitals need to evolve from generalized institutions that do all things to medical institutions that focus on doing a few things well — focused factories that excel in productivity and quality of outcomes. Insofar as CON protects the status quo, it is the enemy of focused factories, the enemy of innovation and the enemy of productivity and quality.

Unfortunately, it has been years since anyone has championed the causes of health care productivity and quality in Virginia. It’s a cause that Virginia Republicans could take up — but haven’t. Unless CON repeal is bundled into a larger vision of restructuring the healthcare industry along market- and innovation-driven lines, I doubt the little CON-deregulation boomlet will get anywhere… and probably doesn’t deserve to.

Virginia’s Top Stories in 2014

mcd convictedBy Peter Galuszka

The Year 2014 was quite eventful if unsettling. It represented some major turning points for the Old Dominion.

Here are my picks for the top stories:

  • Robert F. McDonnell becomes the highest-ranking former or serving state official to be convicted of corruption. The six-week-long trial from July to September of the Republican former governor and his wife, Maureen, was international news. In terms of trash, it offered everything – greed, tackiness, a dysfunctional marriage, a relationship “triangle,” and an inner glimpse of how things work at the state capital.  More importantly, it ends forever the conceit that there is a “Virginia Way” in which politicians are gentlemen above reproach, the status quo prevails and ordinary voters should be kept as far away from the political process as possible. It also shows the unfinished job of reforming ethics. The hidden heroes are honest state bureaucrats who resisted top-down pushes to vet dubious vitamin pills plus the State Police who did their investigative duty.
  • Eric Cantor loses. Cantor, another Republican, had been riding high as the 7th District Congressman and House Majority Leader. A wunderkind of the Richmond business elite, Cantor was positioned to be House Speaker and was considered invulnerable, at least until David Brat, an unknown college economics professor and populist libertarian, exploited fractures in the state GOP to win a stunning primary upset. Cantor immediately landed in a high-paying lobbying job for a financial house.
  • Terry McAuliffe takes over. The Democrat Washington insider and Clinton crony beat hard-right fanatic Kenneth Cuccinelli in a tight 2013 race. He bet almost everything on getting the GOP-run General Assembly to expand Medicaid benefits to 400,000 low income Virginians. He lost and will try again. He’s done a pretty good job at snaring new business, notably the $2 billion Shandong-Tralin paper mill from China for Chesterfield County. It will employ 2,000.
  • Roads projects blow up. Leftover highway messes such as the bypass of U.S. 29 in Charlottesville finally got spiked for now. Big questions remain about what happened to the $400 million or so that the McDonnell Administration spent on the unwanted U.S. 460 road to nowhere in southeastern Virginia.
  • Gay marriage becomes legal. A U.S. District Judge in Norfolk found Virginia’s ban on gay marriage unconstitutional and the U.S. Supreme Court pushed opening gay marriage farther. The rulings helped turn the page on the state’s prejudicial past, such as the ban on interracial marriage that lasted until the late 1960s.
  • Fracking changes state energy picture. A flood of natural gas from West Virginia and Pennsylvania has utilities like Dominion Resources pushing gas projects. It’s been nixing coal plants and delaying new nukes and renewables. Dominion is also shaking things up by pitching a $5 billion, 550-mile-long pipeline through some of the state’s most picturesque areas – just one of several pipelines being pitched. The EPA has stirred things up with complex new rules in cutting carbon emissions and the state’s business community and their buddies at the State Corporation Commission have organized a massive opposition campaign. McAuliffe, meanwhile, has issued his “everything” energy plan that looks remarkably like former governor McDonnell’s.
  • State struggles with budget gaps. Sequestration of federal spending and defense cuts have sent officials scrambling to plug a $2.4 billion gap in the biennial budget. It is back to the same old smoke and mirrors to raise taxes while not seeming to. Obvious solutions – such as raising taxes on gasoline and tobacco – remain off limits.
  • College rape became a hot issue after Rolling Stone printed a flawed story about an alleged gang rape of a female student at the prestigious University of Virginia in 2012. Progressives pushed for raising awareness while conservatives took full advantage of the reporter’s reporting gaps to pretend that sex abuse is not really an issue.
  • Poverty is on the radar screen, especially in Richmond which has poverty rate of 27 percent (70 percent in some neighborhoods) and other spots such as Newport News. Richmond Mayor Dwight Jones got a lot of national press attention for his campaign to eradicate poverty but it is really hard to understand what he’s actually doing or whether it is successful. The real attention in Richmond is on such essentials as replacing the Diamond baseball stadium, justifying a training camp for the Washington Redskins and giving big subsidies for a rich San Diego brewer of craft beer.
  • Day care regulation. Virginia has a horrible reputation for allowing small, home day care centers to operate without regulation. Dozens have children have died over the past few years at them. This year there were deaths at centers in Midlothian and Lynchburg.
  • The continued madness of the Virginia Tobacco Indemnification and Community Revitalization Commission. This out-of-control slush fund in the tobacco belt continued its waywardness by talking with Democratic State Sen. Phil Pucket about a six-figure job just as Puckett was to resign and deny a swing vote in the senate in favor of expanding Medicaid. The commission also drew attention for inside plays by the politically powerful Kilgore family and giving $30 million in an unsolicited grant to utility Dominion.