The Legal Corruption of COPN

Sentara: Monolith

by James C. Sherlock

I have been asked to give examples of the corruption of administration of the Certificate of Public Need (COPN) law and show how it has created and supports regional monopolies. I have chosen as my example COPN Planning District 20 which is my home area of south Hampton Roads, the cities of Norfolk, Virginia Beach, Chesapeake, Suffolk and Portsmouth, home to more than 1.2 million people.

Sentara Health and its massive vertically integrated health system thoroughly dominate this area and the COPN process here.

Sentara has five general hospitals in south Hampton Roads: two in Norfolk, two in Virginia Beach and one in Suffolk. Portsmouth’s hospital is Bon Secours Maryview. Bon Secours also operates DePaul hospital in Norfolk. Chesapeake’s general hospital is state-chartered Chesapeake Regional Medical Center.

Bon Secours and Chesapeake Regional combined have lost money for years on their hospital operations here while Sentara hospitals have operated at double digit margins. In 2017, Sentara’s five hospitals made 87% of the operating revenue of the entire corporation.

It is those profits taken from overcharging patients that fund vertical integration and scale. I just opened the Sentara website and it announced that Sentara has 268 locations of care near my home Virginia Beach. Sentara’s captive HMO and insurer Optima is powerful in Hampton Roads and makes life difficult for Sentara competitors. Sentara controls a large percentage of referrals through its massive network. Bon Secours and Chesapeake have been starved of the money to compete.

The 2008 COPN scandal of which I wrote earlier awarded two hospital certificates to Sentara and denied three parallel applications of Bon Secours on the same date. That decision sealed the Sentara monopoly here and ensured the fiscal distress of Bon Secours. The Health Commissioner in 2008 went to the job from Sentara. She announced that she had recused herself from the decision. The most consequential decision in COPN history was announced by her deputy.

Shocked, the General Assembly actually changed the COPN law after this decision to encourage the Commissioner to consider “the extent to which the proposed service or facility fosters institutional competition that benefits the area to be served …” [1] The irreversible damage here had already been done.

I have assessed data from the records of the COPN program from 2001 through 2018. The results below confirm its absolute control by Sentara in south Hampton Roads.

The data show Bon Secours and Chesapeake Regional have been largely blocked by COPN from expanding in the businesses Sentara most covets – hospitals, ambulatory surgical centers, imagery centers and highly complex (and profitable) services. Riverside has tried to expand to south Hampton Roads with surgical centers and has been denied certificates to do so.

Another facet of these data is the lack of applications from physicians other than eye surgeons wishing to establish their own surgical or imagery centers.  Such projects costs about $100,000 to prepare and six months to a year to go through the application process. History tells them that their applications will be rejected. So, for years individual physicians have petitioned their state representatives for special bills exempting their projects from the process. Many such bills were introduced, but few if any passed.

COPN application decisions in Planning District 20, 2001 – 2018[2]

Sentara

  • Applications: 61. These include a new general hospital in Virginia Beach, expansion of a general hospital in Suffolk, a long-term acute-care hospital, a mini acute-care hospital in Suffolk, four outpatient surgical centers, and three imagery centers
  • Approvals: 58
  • Denials: 2 (outpatient surgical centers)
  • Recommended denials by Virginia Department of Health Division of Certificate of Public Need (DCOPN) staff: 14
  • Withdrawn: 1 (outpatient surgical center)

Chesapeake Regional Medical Center[3]

  • Applications: 13. These include an outpatient surgery center, two imagery centers, and open-heart surgery services
  • Approvals: 9
  • Withdrawn: 3 (two imagery centers and introduction of stereotactic radiology services )
  • Denials: 1 (open heart surgery services)
  • Recommended denials by DCOPN staff: 3

Bon Secours[4]

  • Applications: 26. These include establishing four hospitals, open- heart surgery services, an outpatient surgical center and two imagery centers)
  • Approvals: 19 (no hospitals
  • Withdrawn: 1 (new hospital)
  • Denied: 6 (all new hospital applications, two outpatient surgical centers, center for MRI imaging, center for radiation therapy)
  • Recommended denials by DCOPN staff: 11

Riverside[5]

  • Applications: 7. These include five outpatient surgical centers and two mobile sites
  • Approvals: 2 (mobile imagery)
  • Withdrawn: 1 (outpatient surgical center)
  • Denied: 4 (all outpatient surgical centers)
  • Recommended denials by DCOPN staff: 3

Decisions for medical facilities that don’t compete with Sentara

  • Children’s Hospital of the King’s Daughters: all approved
  • Eye surgery centers: all approved
  • Nursing home establishment and expansion: all approved
  • Psychiatric bed expansion: all approved

Commissioners overturn DCOPN staff recommendations

  • Staff recommended denial / Commissioner approved: 20 times (Sentara 12, Bon Secours seven, Chesapeake one)
  • Staff recommended approval / Commissioner denied : 4 times (Bon Secours, Chesapeake, Riverside two)

You can see above that Commissioner overturned the recommendations of the professional staff of the Division of Certificate of Public Need (DOCPN) in Sentara’s favor 12 times in just 61 applications and sustained denials only twice resulting in a 95% Sentara approval rate. Those overturn decisions by the political appointee were worth billions of dollars to Sentara.

Attorney General Herring owes the people an investigation to see if laws were violated. He should ask the Justice Department to participate, as they bring to bear the much stronger penalties of federal law including RICO. Start with staffers who were present.

The General Assembly and the Governor need to look at these results and understand that the current system has been corrupted because it has a single politically appointed decision maker. If we must have COPN, then it should be administered by an independent regulatory agency on the Maryland model[6]

James C. Sherlock, a Virginia Beach resident, is a retired Navy Captain and a certified enterprise architect. As a private citizen, he has researched and written about the business of healthcare in Virginia. 


[1] Code of Virginia § 32.1-102.3

[2] COPN Monthly Report October 2019

[3] Chesapeake Regional simply does not have the resources to attempt to expand more than with its applications represented here.

[4] Bon Secours has tried for years to expand enough to make its operations profitable in south Hampton Roads.  It just can’t get certificates approved.

[5] Riverside tried five times to establish a foothold in south Hampton Roads and was denied each time.

[6] https://mhcc.maryland.gov

There are currently no comments highlighted.

17 responses to “The Legal Corruption of COPN

  1. This is as old as the hills. Many years ago, my late father, a doctor, owned his own urology practice in a small town in Eastern North Carolina. He could do most types of surgery but his patients had to travel from a very large and sparsely-populated area — the swamps of Hyde and Dare Counties, for instance. The nearest hospitals of any size that could do really complex stuff were hours more away at Duke or Chapel Hill. There was a proposal to create a medical school at East Carolina University in much-closer Greenville. Incredibly, a lot of doctors didn’t want it (Dad not included) because it would hurt their business. I don’t recall is North Carolina has a COPN.

  2. Thank you for this research and information. It represents a great deal of work. I do, however, have some qualms.

    I am really uncomfortable with how the terms “corrupt” and “corruption” are thrown around on this blog to define public officials or decisions that one disagrees with. “Corruption” is associated with taking a bribe or some other illicit payment in exchange for some official act. Stretched, it could also apply to steering jobs, contracts, or other benefits to one’s friends or relatives, who are not otherwise qualified.

    Being biased in favor of one position or another is not the same thing as being corrupt. A Commissioner of Health, who had a previous position with a hospital, would probably at least have a warm spot in his/her heart for that hospital and would probably tend to look with favor on any COPN application from that hospital. That Commissioner could have a bias, or conflict of interest, which would be subject to criticism, but it would not be corrupt.

    Looking back over the period regarding COPN applications from Planning District 20, I could find only one Commissioner of Health who had any prior position with a hospital and that Commissioner, Cynthia Romero (2012-2015) was the Chief Medical Officer and Assistant Vice President of one of Sentara’s competitors, Chesapeake Regional Medical Center. So, there does not seem to have been any institutional bias built in for Sentara.

    It does seem unusual that the DOH staff was overruled on 14 denial recommendations for Sentara. However, one would have to look at the circumstances surrounding those denials before concluding that something untoward was going on.

    This is an area in which I can get quickly over my head (if I haven’t already), but I will venture that the extent of vertical integration that has been allowed accounts for as much of the power of some hospital groups, such as Sentara in Hampton Roads and Bon Secours in Richmond as COPN. Or, maybe, it is the combination of vertical integration and COPN.

    • “I am really uncomfortable with how the terms “corrupt” and “corruption” are thrown around on this blog to define public officials or decisions that one disagrees with.”

      I understand your point and concern. But I use the term in its broad general definition. That most all systems or institutions and products and groups of people or persons are corrupt as a matter of course simply because it or they no longer serves it’s or their purposes well. Indeed, corruption is a ubiquitous state of nature. Nature is not perfect, never can be, so it is always in flux and out of sync with ever changing reality to one degree or another in an ever changing world. The real problem is that very few people see and understand this fact of nature, so they are greatly surprised with disasters, and lost opportunities, small and large, that are always in progress and often ensue to a far greater degree than otherwise they might, particularly in course of human affairs. Here, today, most of us are clueless as to this ubiquitous fact of life and our lives, given the spectacular apparent success of America, that is in many respects falling apart around us.

      In the end, only the paranoid succeed, said the guy who helped built Intel, the once dominant micro chip maker in world. Another example are the great visionaries and doers, who were also “paranoid” in the US Navy and Marine Corps between WW1 and WW2. Their paranoid attitudes won the latter War far quicker and more efficiently than otherwise would have been the case. And as most always the case, they were a far smaller group of individuals than is even remotely appreciated now, particularly in US Navy, and even in the Marine Corps where the few could make a very large impact in the tiny Marine Corps then only say 16,068 men in 1933.

      Those who constantly attack corruption are doing a critical, and essential public service. Because it goes on while most everyone else is asleep at the switch of disaster.

      • While I agree with specific points made by others on the question of what comprises “corruption”, I believe Those specific points are far too narrow and limiting, and dangerously so. It is vitally important that we fully understand the broad definition of corruption if only because corruption in its most damaging form often occurs when otherwise well intentioned people, cannot see, much less understand, simple truths right in front of their noses, or easily discovered and revealed with little effort. Thus these people, which comprise most all of us from time to time, lose the ability to see and think clearly and objectively about what is truly happening around them. Unable to see and think clearly, they are unable or unwilling to stop doing harm to others.

        The great novelist Leo Tolstoy summed up this human affliction best:

        “I know that most men, including those at ease with problems of great complexity, can seldom accept the simplest and most obvious truth if it be such as would obligate them to admit the falsity of conclusions which they have delighted in explaining to colleagues, which they have proudly taught to others, and which they have woven, thread by threat, into the fabric of their lives.”

        The quote opens the fine book by Richard H. Sander and Stuart Taylor, Jr. titled “MISMATCH, How Affirmative Action Hurts Students Its Intended To Help, And Why Universities Won’t Admit It.”

        About this book Clarence Page, Pulitzer Prize-winning syndicated columnist for Chicago Tribune said:

        “As a high profile defender of affirmative action, I used to think that so-called “mismatched problem” was a bit overblown. Richard Sanders and Stuart Taylor have caused me to think again. How many bright and promising minority students, we must ask, have failed because they were steered – with the best intentions, of course – into elite schools for which they were less prepared academically than most of their classmates. What better ways can we devise to boost achievement and expand the pool of qualified students of all races? We don’t don’t do future generations of students any favors by trying to ignore this issue or pretend that it does not exist. If common sense moderates don’t step up and engage this debate, we only allow the extremists to take control of it.”

        Clarence Page’s words written in 2012 were prescient. The extremists now have taken control of this issue and the damage has spread far and wide throughout American society, doing great harm to all Americans in myriad ways.

    • I agree with every point you made except this:

      “Stretched, it could also apply to steering jobs, contracts, or other benefits to one’s friends or relatives, who are not otherwise qualified.”

      I think you should have left out the words “stretched” and “could”. In my opinion, public officials steering jobs, contracts, or other benefits to friends or relatives who are not otherwise qualified is definitely corrupt.

    • From January 2008 – Jan 2013 Dr. Karen Remley was health commissioner. Prior to her appointment, she was Vice President of Medical Affairs at Sentara Leigh Hospital in Norfolk. During her tenure, there were three Sentara applications for Certificates for which the staff recommended denial. Two were overturned in Sentara’s favor, including the 2008 Sentara/Bon Secours knife fight that Sentara won.
      Six of the overturns occurred in a 12 month period between July of 2004 and June of 2005. I am unable to determine who was Health Commissioner at that time.
      The 95% Sentara certificate approval rate over an 18 year period and the overturning of professional staff denial recommendations 12 times in 14 cases during that period in which Sentara was the applicant needs to be investigated for potential criminal activity and I have asked the AG to investigate.
      The overturns have been worth billions of dollars to Sentara. Whatever motivated the Commissioners in these decisions, the result is a system accurately seen as corrupt. The rate at which those decisions overturned the recommendation of the professional staff are not only are a legitimate scandal, but have cost the people of south Hampton Roads hundreds of millions of dollars in inflated healthcare costs because of the state-granted regional market power that Sentara wields with our commercial insurers.

      • The US Navy lost one hell of a good man when you retired. Fortunately it has been a great windfall public benefit for all Virginians. Great good will come from your work here, sooner or later, one way or another.

  3. One basic problem is whether health care is considered a “right” and a “need” to keep a healthy and productive society going. The other alternative is the “free market.” Does it work better or not?

    • I would argue that healthcare cannot be a right because an individual cannot obtain healthcare without putting a burden on another individual or individuals. In my opinion a right is something that can be exercised without requiring action by another party. The following [possibly] extreme result of healthcare becoming a right explains why:

      Let’s say we do decide that healthcare is a basic human right. Once that happens, the government will have to enact a lot more laws and regulations to make sure that doctors and hospitals do not deprive anyone of this right. And patients will be eligible a for damages if it is determined their right to healthcare was infringed. What if, as a result of government interference and nuisance lawsuits, people decide to stop entering the medical field? After a while, we would end up with a severe shortage of doctors and nurses. What would the government do then? After all, healthcare is a RIGHT!! The government wouldn’t have much choice but to start requiring that some people become doctors, nurses, etc., in order to make sure everyone can avail themselves of the right to healthcare. end result? The “right” to healthcare effectively makes healthcare workers government-owned slaves (albeit at government-controlled salaries).

      Regarding your second question, is the government guaranteeing access to basic healthcare for everyone a national need, required in order to promote the general welfare? I am open to being convinced that is the case – but I do have serious reservations about creating another entitlement program.

  4. Pingback: COPN Counterpoint | Bacon's Rebellion

Leave a Reply