Doctors sue to topple Georgia law regulating health industry growth

Georgia Certificate of Need law

» The Certificate of Need law requires health care providers to get permission from the state before expanding or building new health care practices, such as hospitals, or buying certain medical equipment.

» The CON debate has heated up at the Legislature in recent years as surgeons have fought to be able to build outpatient surgery centers that perform multiple types of procedures without having to undergo the state’s arduous CON approval process, which can cost tens of thousands of dollars and take more than a year.

» In 1964, New York became the first state to enact a statute empowering state government to determine whether there was a need for any new hospital or nursing home before it was approved for construction.

» Four years later the American Hospital Association expressed an interest in Certificate of Need laws.

» By 1975, 20 states had enacted CON laws. By 1978, 36 states had enacted them.

» Georgia’s CON program was established by the General Assembly in 1979.

Sources: National Conference of State Legislatures; Georgia Department of Community Health

What is the Goldwater Institute?

The Goldwater Institute, based in Phoenix, is a conservative watchdog group that aims to limit the power of the federal and state governments. It was established in 1988 with the support of the late U.S. Sen. Barry Goldwater of Arizona, who was the Republican nominee for president in 1964.

The institute is co-representing two physician plaintiffs in a lawsuit, filed June 30, to overturn Georgia’s Certificate of Need health care regulatory process.

Two Cartersville ob/gyns filed suit Tuesday to overturn the state’s health care regulatory process, saying it restricts competition and is unconstitutional.

Drs. Hugo Ribot and Malcolm Barfield are challenging the Georgia Certificate of Need program, a complex set of regulations governing the creation and expansion of medical facilities.

The Certificate of Need process has long been controversial because hospitals often use it to challenge competitors’ proposed projects. It has also pitted doctors against hospitals in battles over building surgery centers.

The physicians’ lawsuit, filed in Fulton County Superior Court, is believed to be the first such litigation seeking to overturn the state’s entire Certificate of Need, or CON, program, said Glenn Delk, an Atlanta attorney for the physicians.

Georgia’s hospital industry generally has been a fierce defender of the CON laws, maintaining that hospitals need money-making services such as surgery protected by regulation to offset the financial losses they incur through intensive care, trauma treatment and other unprofitable services.

But the physicians’ lawsuit says Georgia’s CON laws “are a restraint on competition, economic liberty and consumer choice.”

The CON regulations “encourage and facilitate state-granted monopolies and have the effect of restricting competition in the provision of health care services,” the lawsuit says.

The two ob/gyns recently sought a Certificate of Need to allow them to expand the surgery center they own. But state regulators in March denied them permission to add a second operating room or to allow other ob/gyns to perform surgery at the facility.

The Georgia Hospital Association said Tuesday that it is reviewing the lawsuit, but declined further comment.

The lawsuit named the commissioner of the state Department of Community Health and another agency official as defendants. The agency, through a spokesman, declined to comment on the lawsuit.

What it means if the lawsuit succeeds

A successful lawsuit could create a national precedent for overturning CON laws, which exist in 36 states, said James Manley of the Goldwater Institute, a free-market advocacy organization based in Phoenix that is also representing the plaintiffs.

“It’s simply unconstitutional and bad policy for the state to put up a roadblock’’ to health care competition, Manley said. The lawsuit cites the anti-monopoly clause in the Georgia Constitution.

The litigation comes at a highly visible juncture for the state’s CON program.

In fast-growing Columbia County in metro Augusta, three hospital organizations are vying to build that county’s first hospital. And in Newnan, Superior Court Judge Emory Palmer has ordered Community Health to award a CON to an organization that wants to build a psychiatric and substance abuse hospital in the city, countering the state’s previous denial of that license.

Do CON laws affect health care costs?

Manley of the Goldwater Institute cited data indicating that health care costs are higher in states that have CON laws than in those that don’t.

Cartersville Medical Center, Floyd Medical Center in Rome, and Wellstar Kennestone Hospital in Marietta opposed the ob/gyns’ surgery center expansion, the lawsuit states.

Manley said letting other surgeons use the center when Ribot and Barfield are busy delivering babies would help cover the facility’s overhead costs and give more doctors and patients access to a surgery center.

But Manley said the Department of Community Health argued that since the center is not used every day, there’s no need to allow other doctors to use the facility or add another operating room.

“The Georgia Department of Community Health is saying that because Dr. Ribot and Dr. Barfield can’t be in two places at once, women who need critical care, like those with ovarian cancer who need hysterectomies, will either have to wait or pay thousands more for the procedure at the hospital,” Manley said.

Why Georgia is a good battleground

Georgia’s strong anti-monopoly clause provides a good opportunity to challenge CON here, Manley said.

Attorney Stan Jones of Nelson Mullins Riley & Scarborough, who has years of experience dealing with CON in Georgia, said similar constitutional arguments against these regulations have been made in several states.

“But it has generally been recognized by the courts that the state Legislature measures the balance among its legitimate goals assuring access to (medical) services, cost efficiencies, and appropriate competitors,’’ Jones said.

Ribot told Georgia Health News on Tuesday that overturning the regulations through the lawsuit would lead to more efficiency in the state’s health care system. “Costs would go down,’’ he said.

Barfield said he was upset with state legislators “because they continue to have these monopoly laws.”

In 2008, the U.S. Justice Department and the Federal Trade Commission said CON laws “impede the efficient performance of health care markets,” Manley noted.