Iowans Need Change: The Case for Repeal of Iowa's Certificate of Need Law.

• Author: Bogart, Grace

1. Introduction 222 II. Background 222 A. The Implementation of CON Laws: State Invention, Federal Initiative 223 B. The Implementation of Iowa's CON Law 224 C. The Process of Attaining an Iowa CON 224 1. Determination Proceeding 225 2. Application Process 226 3. Notice to Competitors 226 4. Decision--Basis for Grant or Denial 227 5. Penalties 228 D. Falling Under the Scope of Iowa's CON Law 229 1. Who Needs a CON? 229 2. Who Wants a CON? 230 E. Current Proposed Amendments 231 III. Analysis 231 A. CON Goals and Intended Outcomes 231 B. Disloyalty to Goals and Intended Outcomes 232 1. The Cost of Restricted Access 233 2. The Cost of Mistakes 234 3. The Increase of Per-Unit Cost 235 C. Are There Any Benefits to CON Regulations? 237 IV. Recommendation 238 A. Iowa's CON Law Negatively Affects the Adequacy of Institutional Health Services 238 B. Iowa's CON Law Negatively Affects the Economic Provision of Health Services 238 C. The CON Program's Natural Replacement 240 D. Addressing the Threat of a Hospital Shutdown 241 E. Rejecting H.F. 2263 and Abandoning the Iowa CON Program Completely 242 V. Conclusion 243 I. INTRODUCTION

   Health care costs are tragically rising, and consumers are paying the price. Additionally, solving the health care cost crisis is not a simple task. Some argue that the nearly 1000 pages of the Patient Protection and Affordable Care Act (Affordable Care Act) did not even scratch the surface of solving the underlying problems in the American health care system and still left many marginalized people without proper access to healthcare. (1) This Note does not purport to solve each and every source of rising health care costs. However, the health care system is riddled with inefficiencies--some of which are easily expendable--and this Note attempts to address one in particular: the Certificate of Need (CON) program.

   Iowa's CON law will specifically be addressed. But before delving into the history of CON implementation in Iowa, this Note first provides an overview of the conception of CON laws on a national scale and the problem they were initially intended to solve. A roadmap will then be established for maneuvering the Iowa CON process: the process of attaining a CON, the penalties for not attaining a CON, the process an institutional health facility would go through to determine if the facility required a CON in Iowa, and finally, the current proposed amendments to the CON program.

   The effectiveness of CON programs generally will be analyzed--focusing primarily on health care cost, their disloyalty to the outcomes in which they were implemented to address, and whether the benefits thereof derived are worth their shortcomings. The Note will analyze Iowa CON laws specifically and compare the effects of Iowa CON to states that have acted to repeal their programs.

   Finally, this Note recommends that Iowa repeal its CON program, while paying close attention to, and simultaneously providing a remedy for, any potential negative effect that may derive from a CON program repeal.

2. BACKGROUND

   Prior to discussing the level of effectiveness of CON laws and their unintended consequences, this Part will provide a basic history of the origin of CON laws at the federal level and the history of CON laws particular to their effect in Iowa. Then this Part will provide a comprehensive guide of Iowa's CON program and how a CON is attained. The major questions will then be answered: How does an entity know if a CON must be obtained for a certain project? What factors does the Council consider when determining need in its grant or denial of a CON? And finally, what penalties would an entity incur in Iowa if it were to fail to obtain a required CON?

   1. The Implementation of CON Laws: State Invention, Federal Initiative

      Controlling the rise in health care costs without sacrificing quality is, and has always been, a serious governmental concern. However, over time the "ideal" strategy for striking this balance has changed. In 1946, for example, Congress passed the Hill-Burton Act to "promote the development of community hospitals by providing states with funds for facility construction." (2) This Act provided a financial incentive to states for the formation of modern health care infrastructures. (3) From 1947 to 1971, the Hill-Burton Act was responsible for "$3.7 billion in federal funding and $9.1 billion in matches from state and local governments." (4) This funding created space for nearly half a million beds, spanning a total of 10,748 projects in a variety of health facilities. (5) The idea was inspired by "the 'Roemer Effect,' i.e., the theory that there is a high correlation between the number of available hospital beds and the use of those beds." (6) However, the governmental financial investment in the health care industry pursuant to this statute proved ineffective--health care costs became highly inflated, in effect making "modern health care" more difficult to access and afford for those to which it was originally intended to help. (7)

      In response to the inflating health care costs, the ideal strategy for ensuring the advancement of a quality modern health care system shifted in the early 1960s from the Hill-Burton Act, which prioritized heavy financial investment in the industry, to a costcontrolled marketplace. (8) Since the rising health care costs were attributed to the inefficient, "over-investment in duplicative health care facilities," (9) Congress enacted a series of legislation in 1974 which provided financial incentives to states implementing processes to control such "over-investment." (10) Thus, the federal government mandated state CON programs--regulatory programs restricting the construction of and investment in institutional health facilities based on market need--pursuant to the National Health Planning and Resources Development Act (NHPRDA). (11) By 1978, 36 states opted into the federal funding initiative and enacted their own statewide CON laws, (12) and by 1982, every state except Louisiana had enacted such programs. (13) However, the effectiveness of CONs was quickly called into question, (14) leading Congress to repeal the NHPRDA in 1987. States were then free to control inflation caused by excessive health care investment without any federal financial influence. (15) Today, the CON laws of 36 states plus Puerto Rico, the U.S. Virgin Islands, and the District of Columbia, remain in force. (16)

   2. The Implementation of Iowa's CON Law

      Iowa implemented its own CON laws in 1977 pursuant to NHPRDA, and the laws--subject to a few amendments--are still in force today. (17) Iowa CON laws carry the purpose of "ensur[ing] that the citizens ... will receive necessary and adequate institutional health services in an economical manner." (18) In alignment with this goal, it is understood that the State Health Facilities Council (the Council) "avoid[s] unnecessary duplication of institutional services as well as ... control[s] the costs of administering these services." (19) These goals and expectations shed light on Iowa's CON policy and will be analyzed in later Parts of this Note.

      Iowa Code Sections 135.61-83 provide for the implementation of a CON program in Iowa and prescribes the program's basic requirements. Under the Iowa Code, a "new" or "changed" institutional health service (20)--any health service furnished in or through institutional health facilities or health maintenance organizations, including mobile health services--shall not be offered or developed in this state without prior application to the department for, and receipt of, a CON. (21) Pursuant to Iowa Code Sections 135.61-83, the Iowa Department of Public Health (the Department) is responsible for enforcing this program. (22) It does so through a five-member council appointed by the governor and confirmed by the Iowa Senate. (23)

   3. The Process of Attaining an Iowa CON The process of obtaining a CON can be daunting in light of the time required to file all necessary paperwork and await a decision, the cost of hiring an attorney to maneuver the administrative process in the most effective manner, and the risk of a denial by the Council after the plans for an institutional health facility venture are nearly solidified. (24) In an attempt to address these concerns, this Part presents a comprehensive guide to Iowa's CON process.

      1. Determination Proceeding

         Although the Iowa Code defines the scope of the CON program generally, there may be a situation in which a party is unsure of the statute's particular applicability. To address this concern, the Department passed Iowa Administrative Code Rule 641-202.3(1), which provides for a determination of reviewability proceeding--a proceeding specifically for the purpose of determining whether a proposed construction or financial investment falls under the scope of Iowa's CON laws. (25) The Department, rather than the Council, conducts this preliminary proceeding, their determination of which is then provided to the Council for a final decision on the matter. (26)

         The determination proceeding is available to a sponsor of a project (27) who submits a written request for reviewability. (28) To be considered, the request should include: (1) sufficient details of the proposed project and (2) citations to the sections of the Iowa Code the sponsor relies upon to assert the project is not reviewable. (29) If the Department determines the proposed project to be non-reviewable--to not fall under the scope of Iowa's CON laws--the determination is sent to the Council for final consideration on the matter of reviewability. (30) On the other hand, if the Department determines the project is reviewable, the sponsor's application moves on and serves as the letter of intent for the purpose of the CON application. (31) It is important to note that a determination proceeding is not a prerequisite for a CON application; it is an option available to potential sponsors intended to streamline the CON...