COVID-19, COPN, and Strawmen

by James C. Sherlock

Every time the discussion in this space turns to COPN and its relationship to lack of capacity to deal with COVID-19, some commenters accuse the authors of these columns of favoring nonsensical solutions such as forcing hospitals to build excess capacity. Those same commenters then reject those concepts as unworkable. That is the very definition of a straw man. Unfortunately it mirrors what will be a all-hands-on-deck attempt by Virginia’s hospitals and their lobbyists to sweep the damning history of COPN under the rug in the 2021 General Assembly.

No author has suggested building excess capacity to “sit idle”; what we each have suggested is to let commercial businesses, both for-profit and not-for-profit, build what they think is necessary where the think it is necessary without state interference other than enforcement of antitrust and licensing laws. Every one has carefully wrought business plans. If some misjudge demand, then either they will fail or their competitors will. If it existing provider facilities fail, that means that the new entrant offered better care or a better price or both. Any restrictions on such creative destruction must be swept away for the good of all of us.

What about day-to-day non-crisis access for the poor?

“Recent research by Thomas Stratmann and Jacob Russ demonstrates that there is no relationship between CON programs and increased access to health care for the poor. There are, however, serious consequences for continuing to enforce (COPN) regulations. In particular, for Virginia (COPN restrictions) could mean approximately 10,800 fewer hospital beds, 41 fewer hospitals offering magnetic resonance imaging (MRI) services, and 58 fewer hospitals offering computed tomography (CT) scans. For those seeking quality health care throughout Virginia, this means less competition and fewer choices, without increased access to care for the poor.”[1]

That was a projection in 2015. Today, state COPN data show that the three levels (or now two everywhere but Northern Virginia) of COPN review came to different recommendations or decisions on 40% of the cases. It is clear that the state has no objective standards for restricting supply.

These applications did not seek to build excess capacity in order to let it stand idle. COPN records show that major businesses that have identified over the years unmet needs for extra hospital capacity, new facilities, additional ICU capacity and additional beds, have applied for a Certificate of Public Need and have been rejected.

As a refresher my March 16 column here “Blame COPN for Looming Bed Shortages”, I remind readers that “The certificate denials or withdrawals in the past 20 years that reduced current pandemic capacity include:

  • New Acute Care Hospitals. Nine applications, three from Bon Secours in south Hampton Roads, two from Doctors’ (Riverside) Hospital in Williamsburg (second one revised, re-submitted 18 months later and again denied), one from Sentara to be built in Northern Virginia, one from Inova in an unspecified Northern Virginia location, a second different one from Inova Loudoun Hospital Center, and one from HCA, also to be located in Northern Virginia, were denied
  • Additional hospital beds: The state denied six applications: three from Inova, two Sentara, and one Carilion.
  • Acute care infant bassinets: Two applications from HCA Lewis-Gale Medical Center were denied.
  • Inpatient Long-Term Care or Rehabilitation Hospitals: Eleven applications, nine for new facilities and two for additional beds were denied.
  • Outpatient surgical facilities. Thirty applications for outpatient surgery centers, which would serve to relieve pressure on hospitals during the crisis, were denied. Hundreds more applications were never submitted. (Maryland data indicate that, with the same waiver for physician-owned surgical centers, Virginia would have about 700 ASCs. Becker’s ASC Review reported yesterday that “Array Analytics’ model shows how much the percentage of total available intensive care unit beds in each state would increase if health systems turn to ASCs for space. Overall, using ASCs could increase the national supply of ICU beds by 21% and boost the national supply of medical-surgical beds by 8% , according to the model’s projections.” Maryland has 523 ASACs, Virginia with a 20% larger population has 78. Commenters here imagine that ASCs will kill hospitals. Yet with all those ASCs Maryland has the same number of hospital beds per 100,000 population as Virginia.)
  • Nursing homes. Ten applications for nursing homes, one for a 180-bed facility and nine for additional beds, were denied. Those would have provided space for COVID-19 isolation wards for the elderly in a nursing home setting.”

So let us discuss these issues based on fact, not misunderstanding of the actual historical functioning of COPN and its results. When COVID-19 is over, the hospitals will scramble to defend COPN once again. They have utterly dominated the crafting of state law and policy for the last 50 years and may prevail again in 2021. However, they will be forced, by me and others more influential than me, to answer for these historical facts, including the COPN’s deadly decision in Arlington County (see COPN’s Deadly Quid Pro Quo from March 26 in this space).

We then will truly see whether our Governor and General Assembly can look past their campaign treasuries, influence by hospitals in their districts and their own relative unschooling in the details of COPN restrictions on supply to listen to the facts and do the right thing.

[1] Certificate-of-Need Laws: Implications for Virginia, Christopher Koopman and Thomas Stratmann, Mercatus Center, George Mason University, February 24, 2015

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14 responses to “COVID-19, COPN, and Strawmen

  1. Once more. The very essence of for-profit businesses is to not build excess capacity and especially so if their competitors do not.

    No for-profit business is going to spend money on something that does not generate revenue – enough to pay for the investment and yield a profit.

    Now, if the reform COPN folks want to advocate that ALL competitive providers MUST do two things:

    1. – take any/all clients regardless of their ability to pay – and eat their share of uncompensated care

    2. – pay their fair share of the costs of stand-by beds and equipment.

    3. – that some method be instituted to pay for uncompensated care – at hospitals and competitive providers.

    Under those conditions – I’d welcome COPN reform.

    It’s not really a straw man when the advocates are basically pursuing a sole and independent ideological outcome and don’t care how that affects the existing system that all of us have to pay for.

    Its like letting mom/pops not have to collect sales tax and sell for cheaper because Walmart is bigger.

    it’s just nonsensical.

  2. Larry, I am advocating recognition by the General Assembly and the Governor of the disfunctionality of COPN based on historical facts. I assume I have your agreement on that.
    Second, you seem to be confusing 80% of Virginia’s hospitals with for-profit businesses. They are 501c3 public charities, as is every one of the health systems mentioned in my column that was turned down for certificates in the past 20 years.
    Third, indeed most of ASCs are for-profit partnerships. I drafted and Del. Miyares – a conservative Republican – was the patron for a bill in the 2020 GA that would have permitted an exclusion of physician-owned ASCs from COPN oversight. One of the provisions of that bill required all ASCs to take all government insurance, including Medicaid. I did not add a charity care provision for the simple reason that hospital outpatient departments are already subsidized with higher payments for all procedure codes from all insurers, government and private, that represent funding to care for charity cases (that is “some method to deal with uncompensated care”) and ASCs not associated with hospitals are not. The bill was defeated by Democrats under the sway of the hospitals, who created and love COPN and defend it like the fortress it is.
    As for standby beds, I think I dealt with that concept in my column. Absent COPN, the models show that Virginia would have almost 11,000 more hospital beds today. Creating additional standby beds in a crisis has proven doable. It is standby ICU beds and ventilators to equip them that are the major capacity problem. A study published yesterday in Beckers indicates that the sterile ORs in ASCs can be converted to ICU facilities and their current ventilators used by anesthesiologists can be converted for ICU use.
    All of that addresses the existing system.
    In addition, we will need to create a Virginia Strategic Stockpile with legislation in 2021.
    Not one of those concepts is nonsensical. Not one is ideological. The current system is in place because of the raw political power and campaign donations of the hospitals. Period. COPN has proven potentially deadly because, it has limited healthcare capacity as it was designed 47 years ago to do in addition to raising its costs.
    I respectfully suggest that you don’t have enough of a background to understand the system as it is much less what is wrong with it and loudly and repeatedly proclaim fixes.

    • Jim – first off, COPN has been with us through GOP and now Dem majorities so I just dont’ see it as a Dem vs GOP or even a Liberal versus Conservative issue.

      Next, I’m completely in favor of lower costs for healthcare as well as more competition, I’d love to see hospitals doing only what the free market can’t or won’t do and that the hospitals be funded enough so that they do not have to do cost-shifting nor pursue profitable procedures that allow them to function a lot like Dominion does… i.e. get every penny of profit they can with monopoly protections to do so.

      I’m also in favor of any/all planned and executed approaches to maintaining “extra” capacity for disasters/pandemics the most cost-effective way possible.

      Right now, even with expanded Medicaid and new provider fees – we still have uncompensated care issues with some hospitals that tend to take higher levels of low-income and are not profitable at all.

      So , how do we go about doing COPN in such a way that:

      1. – we do not exasberate the uncompensated care problem further?

      2. – do not push the financially fragile hospitals to further harm, degradation of services and risk of closing?

      In terms of ideology. If you look at this issue from a broader scope – you will see this is one of the issues that Conservative groups advocate and we hear some claims that are not proveable:

      1. – doing COPN will reduce healthcare costs – it’s a belief not a fact as far as I can tell. If there are studies in states that do not have COPN that show that at a macro level, health care costs are lower then I can be convinced. Most of what I hear is that only certain services will be cheaper but the top claim often says “healthcare costs”.

      2. Claiming a lack of beds during a pandemic is due to COPN. I’m even more skeptical of that claim and it does sound very ideological to me.

      Finally, one of the key aspects of the COPN argument seems to be that some hospitals who we feel have claimed to be “non-profit” or “not-for-profit” are, in fact, profitable and far more so than is reasonable.

      I don’t have to be convinced this is true. Some hospital systems have integrated – and to their credit in my view, they have squeezed out excess costs – better than others and as a result can be more “profitable” even if they don’t get any more reimbursement than other.

      You can say that they have mastered the art of cherry-picking themselves!

      My concern is that COPN as being proposed is more machete than scalpel and no I do not accept claims that it’s not. I want to see some evidence, some proof that it really is a scalpel and not a machete.

      We have a good number of states that are not COPN. Can we have a chart that shows overall healthcare costs lower in those states than COPN states?

      I’m just not from the school that we make changes first then see what happened after… then go fix. That’s the approach being advocated for ObamaCare and in my mind, it’s totally bogus. If something is a better way then lets get it online in some places and measure it and get the kinks out before it goes prime time and we turn off the old way.

      How about it?

      To perhaps give some insight to why I feel the way I do – I come from software development world where new systems replace old ones all the time and the classic blunder mistake we see often from folks who are not very good is that they promise the replacement is better than the existing and they just do the replacement overnight and 99 times out of a 100, all hell breaks lose – because its just a spectacularly bad way to reform/upgrade/replace.

      With COPN – baby steps at the GA level and yes, you gotta meet and beat the lobbyists on their turf and the way you do that, in my view is you get the public on your side – not just Conservatives – but across the board and you do that with real data – not promises…

  3. That’s given the assumption of a healthcare system. We don’t have a system; we have a healthcare conglomeration. A more accurate description would be a rubble pile — a rat-infested rubble pile.

    I’ll bet you think the AHA was written by representatives, D or R. Wrong. They were representatives but not not for a party, for the insurance companies.

    To understand America’s healthcare you need only to be able to answer one question, “What’s better than an 80% market share?”

    A guaranteed 50%.

  4. I am going to make a public pledge here that is a bit self serving. I am swearing off publishing in the comments section of this blog. I am 75 years old. I am married to a wonderful woman. I enjoy the time I spend with her. I am in the process of writing a book on the business of healthcare in Virginia. I have submitted columns here, but more often in the past than I will in the future. I also have another related project that is taking up an increasing amount of my time. So if someone challenges my column here and you should certainly do so, that challenge will go unanswered, at least by me. Just a time management issue.

    • sherlockj –

      I feel your pain. I know what you’re feeling. But there is a less drastic solution than zero tolerance. Simply make yourself a pledge never read anything that tar-baby posts here in form of “comments”, including even stuff like “following”. That will fix problem. It will save enormous aggravation. Plus you will miss nothing of value on this blog. And the rest of us will have the benefit of your continuing wise, thoughtful and insightful comments, instead to having to pay for tar-baby’s sins.

      • Using derogatory nicknames and descriptions to refer to other commenters should not have a place on this blog.

      • One of the biggest contributions of Jim Sherlock’s work here on Bacon’s Rebellion is that it in very significant ways answered a important question that had long confounded me. Why was small city and town Virginia so lacking in vibrant healthy growth?

        Indeed why were so many beautiful places filled with rich history and culture, location and good bones of architecture dying in times of great abundance elsewhere, when these Virginia places should be thriving?

        Why all this remarkable contrast in vibrancy between Virginia and say Maryland?

        Jim Sherlock’s work unlocked that secret. COPN, and its corrupt imposition by private interests using money to influence public officials for decades, surely have throttled rural and small and mid-size towns and cities in Virginia. Local doctors and other local health care providers in abundance are the seed corn of health, wealth, and prosperity in these long neglected Virginia places.

        Likely too the lack of good, varied, comprehensive and competitive health care has throttled vibrant and healthy growth of all kinds and sorts throughout all cities and towns in Virginia, a lack of growth missing from top to bottom within these communities.

        • I too welcome Jim Sherlock’s contributions. Regardless of the merits of this arguments, that is not an excuse for name-calling those who take issue with his positions.

    • Jim Sherlock –

      There is a fascinating article in the Review Section of today’s Wall Street Journal written by Eric Schmidt, former CEO and Exec. Chairman of Google. It is entitled A Real Digital Infrastructure at Last, telling how lessons learned with this current virus fallout, can spawn enormous advances in the future. One area surely will be doing away with COPN laws and replacing them with solutions along the lines you discuss in your post. I also occurs to me that these innovations can spark the renaissance in use of private local colleges such as those in Virginia in new ways with great power. I touched on this idea earlier with this comment made on Feb 7, 2020 in BR:

      “The way for the State to address higher ed costs is to offer affordable alternatives for students and parents that want them.”

      I agree with that statement. Here is where private non-profit Virginia colleges might come in, creating for them a new collective to create within those institutions new and affordable alternatives (models) in lower cost education, particularly in critical humanities (like English, writing, history etc.) and low infrastructure STEM, a collective supported by General Assembly so as strengthen and enhance a stronger system of viable alternatives to State system.

      This collective will also help fuel rebirth of rural and smaller metro Virginia, preserving and enhancing vital existing assets to better enable them to power enhanced human capital and wealth creation in these regions.

      The alternative, the loss of these historic assets, would be a tragedy on many levels for the Commonwealth of Virginia.”

      For more on that see:

  5. As long as about 70% of people get their health insurance from their employers and most of our 65 and over as well as others who get it from the ACA and Medicaid, much of the charges are basically negotiated reimbursements with employer-provided and Medicare Advantage further complicating things by using “networks”.

    Further – all insurers, including Medicare adjust their reimbursements on a zip code basis. What does that tell us? Why are costs in one area different than another and does it mean if an insured goes to a lower-price zip code they can save their co-pay? I do not know that answer. Perhaps Jim does.

    So those with insurance are not really interested in looking for lowest price and as far as I know – they cannot necessarily reduce their co-pay if they find a lower price provider. Perhaps if they can – that might be an argument for more competition.

    I personally DO “shop” a little – basically to find providers that produce electronic documentation AND can share it – ideally by using the same web portal as others except unlike Medicare advantage – it’s not a mandatory network – I still have some latitude in choosing providers.

    That’s actually more important to me that cheaper providers because I want all my providers looking at my current electronic medical record in toto, not some faxed snapshot that may not provide all relevant info.

    NOW , if we did have a system where I COULD go to different providers and they all were using the same electronic medical record – I would choose them over other providers. So this is an example of something more than money in the “shopping”.

  6. “We then will truly see whether our Governor and General Assembly can look past their campaign treasuries, influence by hospitals in their districts and their own relative unschooling in the details of COPN restrictions on supply to listen to the facts and do the right thing.”

    I would surely like to see this issue addressed . However, from what I have been reading we have a national issue that has been building since 1945 when the insurers got a pass from anti-trust laws based on the assumption they would be regulated by state insurance commissioners. By the 1980’s they were consolidating into fewer national firms and, having lost leverage, the hospitals responded with some consolidation on their own. The result has been higher costs and less hospitals. “In 1992 the average sized American city had four hospitals; by 2014 it was served by just two.” (Saving Capitalism)

    By the time Congress passed the Affordable Care Act, the hospitals and Insurers used their lobby strength to require no ‘public option’. Everyone was required to buy insurance. The public option is not just a progressive talking point. It is an alternative way to covering the uninsured that the industry is dead set against. It won’t solve the anti-trust issues, nor will it solve the political power that has come with industry consolidation, but a public option would be a start.

  7. I was under the impression (perhaps mistaken) that the hospital industry largely has been in favor of the ACA including the Medicaid Expansion on the basis of more insured and less uncompensated care but not private sector providers who believe they can provide a lot of the services that hospitals do – for less – were not.

    It still is an undeniable reality that the countries with the most government involvement in health care – spend a lot less than us despite claims of rationing, long wait times and death panels etc, actually have lower infant deaths and longer lifespans.

    Many in this country still believe that if the “free market” is allowed to function that we can have better healthcare for less though it’s murky about whether it means everyone or just some.

    The public option is about basic health care. It does not preclude anyone from buying more or better insurance. Just as Medicare pays only 80%, it also allows people to buy supplemental policies or Medicare Advantage.

    The big advantage of Medicare and public option is that they do not use “networks” and tend to inhibit “surprise 3rd party billing” in that if those 3rd party’s do not accept Medicare reimbursement up front – then they are not used.

  8. I really have not paid that much attention to the healthcare debate cause I want to see changes in the way medicine itself is practiced … That said here is a nice run down of what the hospitals are dealing with …

    Evidently they don’t like the emphasis on preventive health and staying out of hospitals, but are happy about all the newly covered patients in areas with lots of previously uninsured patients.

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