By James C. Sherlock

The essential debate on COPN (Certificate of Public Need law) in Virginia has boiled down to imaging and ambulatory surgery centers, and whether those services should be regulated under the program

                                 Kate Masters, Virginia Mercury, 2020

Fast forward to last week. Your author visited his orthopedic surgeon to begin a process he had been putting off – the replacement of his left knee.

That surgeon’s orthopedic group is located in a very large facility in Virginia Beach near the Norfolk boundary.

• Because of COPN, that practice does not even have MRI capability. They must send patients elsewhere, and patients must schedule yet another appointment for MRIs in order for the surgeons to complete their diagnoses;
• They conduct their surgeries in Sentara facilities. For the entirely compelling reason that, thanks to COPN, there is nowhere else to do them.

Old news, you may say.

But repealing the imaging and ambulatory surgery center provisions of COPN just got more urgent. Four more southeastern states, including neighboring North Carolina and Tennessee, are doing so. Maryland already has.

Surgeons, like all of us, will go where they are welcome.

Costs. Facility fees are separate from the professional fees paid to physicians. The doctor who will replace my knee will get paid in 2024 the same $1,262 by Medicare in a hospital or in an ambulatory surgical center (ASC). But the facility fees are $3,500 higher ($12,589 vs. $9,048) if the procedure is done in a hospital outpatient department (HOPD) instead of an ASC.

ASCs are much more efficient than hospitals and single-specialty ASCs are more efficient than multi-specialty ASCs. Both of which mean a typical surgeon can conduct more procedures on surgical days, benefiting both him and his patients. Which is why Virginia should have far more of them.

Medicare saved nearly $120 million in Virginia in 2022 by paying ASCs compared to paying HOPDs for the same procedure, even though we have so few ASCs.

Private insurers (and thus their customers’ rates and co-pays) would save a great deal more. Your private insurer negotiates rates with Sentara and the other regional monopolies. In South Hampton Roads, every hospital in Virginia Beach, Norfolk and Suffolk is owned by Sentara, and Sentara ASCs are bundled in the negotiation package. Sentara owns its own large insurer, Optima, which competes against the other private insurers. Competing insurers must in turn negotiate with its huge health system.

Only in Virginia is that somehow not considered an abusive monopoly.

The Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice jointly have urged repeal of COPN.

Surgeon earnings. Orthopedic surgeons who work in outpatient care centers make $17,000 more annually on average than those who work in hospitals and almost $50,000 more per year than those who work from their offices. The difference is a combination of ownership stake and the operational efficiency advantage of ASCs.

Politics. COPN birthed its own legislative support group.

COPN created and protects the regional monopolies that dominate every metro area but Richmond. Virginia’s hospital-based health systems hate ASCs – unless they own them and thus control the flow of regional surgeries within their portfolios.

In Virginia,

• the hospital lobby has controlled the General Assembly because of donations; because of the numbers of their employees in members’ legislative districts; and because of their singular focus on maintaining COPN as it is;
• Governor Northam convened a working group on COPN reform in 2020 before Covid struck. It had very limited objectives but still never stood a chance. The hospital reps literally walked out. Northam scurried away from the issue never to return;
• doctors – the Medical Society of Virginia – have opposed COPN for years to no avail;
• health insurers are for COPN reform for the most obvious of reasons – their costs and those of their customers would decline. The very large health insurer owned by Sentara splits that lobby;
• for reasons of soaring insurance costs, COPN repeal or reform should be a compelling business lobby issue, but generally has not been in the past;
• what is best for individual citizens hasn’t counted in the General Assembly.

Any surgeon who wants to own his or her own business and optimize both control of his practice and his income will continue to look elsewhere to establish a practice.

They don’t have to look far. Nearby states are relaxing control of ASCs.

Other states. Many states, including the two largest, California and Texas, have gotten along fine for decades without a certificate of need law. Others regulate only nursing homes. Go to that link and open Virginia. Our COPN comprises perhaps the most comprehensive restriction on medical services in America.

Compared to our largest neighboring states in 2024:

• Virginia has 71 Medicare-certified ASCs; most (except ophthalmologic facilities) are owned by hospitals;
• North Carolina, which is removing COPN restrictions on ASCs, has 144; Tennessee, which is also removing restrictions, has 151;
• Maryland has 343.

Recent reforms in certificate of public need programs in North Carolina, South Carolina, Tennessee and Georgia offer to:

• make those states more attractive to surgeons;
• increase patient access; and
• lower their Medicare, Medicaid and private health insurance costs.

Bottom line. All other things being equal, surgeons, especially newly certified ones, will practice in states other than Virginia. But all other things are not equal. Looking just across our state borders at the two contiguous states that just reformed their COPN laws:

• Tennessee has no personal income tax and one of the nation’s four lowest combined tax burdens; and
• North Carolina’s personal income tax is capped at 4.75%; Virginia’s is at 5.75%. North Carolina’s corporate income tax rate, at 2.5%, is less than half of Virginia’s 6%.

Competition matters, even if COPN advocates pretend it does not.

We have pointed out before that Virginia’s non-profit regional monopoly hospital systems are uniquely profitable compared to nationwide norms precisely because they are protected by COPN. Any suggestion that they funnel those windfalls into good works in proportion to the cash flows generated is laughable. They have piled the excess money into corporate war chests, increased corporate staffs, paid themselves Wall Street salaries and donated to political campaigns through their cutout associations.

COPN has given them such dominance that they no longer need protection and have not for decades.  

Individual citizens and businesses need protection from that law.

If Virginia legislators wish to bring down healthcare costs, increase access to surgery from our resident surgeons and attract more surgeons to practice here, they will exempt from COPN ASCs and the equipment surgeons need for diagnostics.

If not, they need only do nothing.

Which has been the case for too long.