Shifting Purpose: Why Iowa's Certificate of Need Law is a Form of Economic Protectionism for Certain Iowa Health Care Providers and Should Be Repealed

Author:Chad A. Heiman
Position::J.D. Candidate, The University of Iowa College of Law, 2019; B.A., The University of Northern Iowa, 2013
Pages:385-416
SUMMARY

The Iowa Legislature enacted the Iowa Certificate of Need (“CON”) law in 1977 after Congress passed the National Health Planning and Resource Development Act (“NHPRDA”). The NHPRDA more or less forced states to adopt CON laws as a prerequisite to receiving federal funding. The federal government repealed the NHPRDA in the 1980s after concluding that the statute, and the CON requirement it imposed ... (see full summary)

 
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385
Shifting Purpose: Why Iowa’s Certificate
of Need Law is a Form of Economic
Protectionism for Certain Iowa Health
Care Providers and Should Be Repealed
Chad A. Heiman*
ABSTRACT: The Iowa Legislature enacted th e Iowa Certificate of Need
(“CON) law in 1977 after Congres s passed the National Health Pla nning
and Resource Development Act (NH PRDA). The NHPRDA more or less
forced states to adopt CON laws as a prerequisite to receiving federal funding.
The federal government repealed the NH PRDA in the 1980s after concluding
that the statute, and the CON requirement it imp osed on the states, did not
control health care costs, but rath er, contributed to increasing health care cost
across the country. Fifteen states ha ve repealed their respective CON law in
response to the NHPRDA’s repeal, b ut Iowa has not. This Note argues that
Iowa should follow those states, th us the Iowa Legislature should repeal , or
significantly amend, the Iowa CON statute because in its current form, th e
statute does not control cost, but results in economic p rotectionism and
contributes to the continual increase i n health care cost for Iowans.
I. INTRODUCTION ........................................................................... 386
II. THE ORIGINS OF CERTIFICATE OF NEED ...................................... 389
A. FEDERAL HEALTH PLANNINGS ORIGINS .................................. 389
1. The HillBurton Act of 1946 ...................................... 389
2. Federal Concern with Health Care Cost
ContainmentSection 1122 of the Social
Security Amendment of 1972 ..................................... 390
B. MANDATING STATE HEALTH PLANNING AGENCIES
THROUGH THE NPHRDA ...................................................... 392
1. NHPRDA and the Proliferation of CON .................... 392
2. Federal Repeal of the NHPRDA ................................. 395
* J.D. Candidate, The Universi ty of Iowa College of Law, 2019; B .A., The University of
Northern Iowa, 2013. Thank you to my fiancé Sarah , our furry companion Kevin, and my family
and friends for their unwavering love, support, and patience throughout law school. I would also
like to thank my colleagues at the Iowa Law Review for guiding me through the publication process.
386 IOWA LAW REVIEW [Vol. 104:385
C. THE IOWA CERTIFICATE OF NEED PROGRAM ............................ 396
1. Iowa’s Implementation of the NHPRDA, the
Creation of the State Health Facilities Council,
and Iowa CON Legislation .......................................... 396
2. Application, Review, and Appeal Process ................... 397
III. IOWAS CON STATUTE DOES NOT ACHIEVE ITS PRIMARY
PURPOSE ..................................................................................... 402
A. NATIONAL AND STATE ECONOMIC ANALYSIS OF CON ............... 403
B. IOWAS CON PROCESS IS UNDULY BURDENSOME,
UNPREDICTABLE, AND SUBJECT TO POLITICAL
INFLUENCE ............................................................................ 406
C. IOWAS CON STATUTE IS A FORM OF ECONOMIC
PROTECTIONISM .................................................................... 408
IV. SOLUTION ................................................................................... 412
A. FULL REPEAL ........................................................................ 413
B. AMENDING THE IOWA CON STATUTE ...................................... 414
V. CONCLUSION .............................................................................. 415
“Patients and doctorsnot state officialsare in the best position to
decide what healthcare services are needed.”1
I. INTRODUCTION
In February of 2012 a patient, twenty-four weeks pregnant, ente red
LewisGale Medical Center in Sale m, Virginia, bleeding and in pa in.2 The
patient was suffering from placental abruption.3 Placental abruption occurs
when “the placenta detaches from the inner walls of the uterus and triggers
premature labor” and can be deadly for the mother and baby.4 The doctor at
LewisGale rushed to call a neighboring hospital six miles away that had a
special treatment center for premature babie s, and an ambulance equipped
to transport newborns.5 Before placing the call the doctor thought, “We ’ve
got a chance.”6 Unfortunately, th e doctor’s optimism quickly evaporated. The
1. Lee Birchansky, Iowa’s CON Job: How the State Prevents Competition in Health Care, DES MOINES
REG. (June 22, 2017, 1:14 PM), http://www.desmoinesregister.com/story/opinion/columnists/iowa-
view/2017/06/22/iowas-con-job-how-state-prevents-competition-health-care/42039000 1.
2. Eric Boehm, How Virginia’s Hospital Licensing Laws Led to an Infant’s Death, REASON
(Jan. 25, 2017), http://reason.com/archives/2017/01/25/virginia-certifica te-of-need-hospital.
3. Id.; see also Placental Abruption, AM. PREGNANCY ASSN, http://americanpregnancy.org/
pregnancy-complications/placental-abruption (last visited July 2, 2018).
4. Boehm, supra note 2.
5. Id.
6. Id.
2018] IOWA’S CERTIFICATE OF NEED LAW 387
only ambulance capable of transporting the baby was not available because it
was out responding to another call.7 The doctor had to tell the mother, who
was fighting for her life, that an ambulance that could potentially save her
baby was not coming.8 Ultimately the mother survived, but the baby tragically
passed away.9
Unfortunately, the baby’s fate was foreseeable. In July of 2010 LewisGale
applied to the Virginia Department of Health seeking permiss ion to build a
neonatal specialty care unit.10 The Department denied the application.11 As a
part of the denial, the Department concluded that a neonatal specialty care
unit at LewisGale “would foster institutional competition.” 12 It was
competitionor at a minimum, the notion of avoiding competitionthat
contributed to a baby’s death. Virginia is not the only state that requires
certain health care providers to obtain government permission before
opening a medical facility.13
Dr. Lee Birchansky is an ophthalmologist in Cedar Rapids, Iowa, offering
patients cataract and other outpatient surgeries.14 Dr. Birchansky operates his
medical practice, Fox Eye Laser & Cosmetic Surgery Institute, and offers
outpatient cataract surgeries in a surgery center he constructed a nd equipped
next to his medical office. 15 Before offe ring new services, Iowa law requires
health providers to obtain a Certificate of Need (“CON”).16 Essentially, a CON
is a permission slip from the government signifying that, after its determination,
a need exists in the market for the services that the health provider intends to
offer. In addition to requiring the government’s permission, the process also
requires the government to inform the applicant’s potential competitors, who
then have the opportunity to offer opposing testimony for the project at a
public hearing.17 A simple e xample illustrates the difficult barriers to entry
inherent in the CON process.
Imagine you would like to own a fast-food restaurant. You have decided
to open a restaurant in the same area as a potential competitor. If CON
applied to the fast-food industry,18 you would have t o approach the state
government and plead your case that a need exists for your restaurant. Then,
7. Id.
8. Id.
9. Id.
10. Id.
11. Id.
12. Id. (emph asis added).
13. See infra notes 9193 and accompanying text.
14. Birchansky, su pra note 1.
15. Id.; see also Cindy Hadish, Cedar Rapids Doctor, State Clash Over Cataract Surgeries, GAZETTE
(Mar. 6, 2012), http://www.thegazette.com/2012/03/06/cedar-rapi ds-doctor-state-clash-over -
cataract-surgeries.
16. IOWA CODE § 135.63(1) (2017).
17. See infra Section II .C.2.
18. Luckily, in Iowa, CON is only ap plicable in the health care industry.

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