Carilion Wants It Both Ways

by Michael W. Thompson

The Roanoke region needs more health care availability according to Carilion, the area’s mega hospital. It now recognizes a problem that other health care providers have long known – the Roanoke area is under-served and has inadequate access to many important health care services. And, of course, Carilion wants to fill this need.

Yet, for years Carilion has fought against allowing competing health care providers to expand or add services. It has lobbied against reforming current Certificate of Public Need (COPN) laws that favor hospital monopolies and have it has used this outdated law to stifle competition. These COPN laws require state approval for additional health care facilities and services and hospitals have an undue influence in stopping competition. The Federal Trade Commission has urged states to get rid of these anti-competitive laws.

Carilion’s approach to blocking competition even garnered the attention of the Federal Trade Commission (FTC). Several years ago, the FTC challenged Carilion’s acquisition of two competing outpatient clinics in the Roanoke area – the Center for Surgical Excellence (CSE) and the Center for Advanced Imaging (CAI), stating in a unanimously-passed administrative complaint on July 24, 2009 that this acquisition would result in a “violation of federal antitrust laws,” higher health care costs, and reduce incentives for those facilities to maintain quality care.

Ironically, before Carilion tried to buy these two competing clinics, it worked to block their COPN applications. Carilion’s eventual acquisition of CAI occurred five years after that competitor opened an advanced imaging center offering services similar to Carilion, but at a lower price. CAI’s quality, convenience, and low cost presented a serious threat to Carilion’s business. The mega-hospital recognized this threat when opposing CAI’s application for additional MRI equipment, noting that “CAI’s introduction of a second scanner threatens the viability of our [hospital] system.”

After success with its first facility, CAI sought to open an independent outpatient surgical center that it subsequently named CSE. The facility was finally awarded a highly-contested Certificate of Public Need (COPN), an outpatient surgical hospital license from the Commonwealth of Virginia, and an ambulatory service center (ASC) certification from Medicare. But despite the clear need for this facility, Carilion opposed this expansion.

The FTC concluded in 2009, that “Carilion acknowledged that it would increase post-acquisition prices for CAI and CSE services” and “the acquisition will directly and substantially harm patients by increasing their out-of-pocket costs.” They cited Carilion’s plan to increase out-of-pocket costs for a brain MRI as high as 900% – from $40 to $350. Carilion eventually agreed to divest from the clinics that restored them as viable, independent competitors to settle the FTC charges.

Another example of the results of Carilion’s use of the COPN law is the 2012 tragedy where a mother, 24 weeks pregnant, went to a hospital in Salem after she experienced a placental eruption. Much to her shock, doctors informed her that they were unable to treat her because they lacked a neonatal intensive care unit (NICU). They quickly called a special ambulance to transport her six miles away to the nearest NICU at Carilion Medical Center.

However, the ambulance to take her to Carilion was out on another trip and, as a result, her child died.

The hospital in Salem had tried twice for approval to build a NICU and had garnered widespread community support. But, they were denied each time in large part, according to those who are familiar with this case, due to Carilion’s opposition. In fact, this writer is told that Carilion was the only voice to oppose this needed NICU during public hearings.

Now Carilion wants to expand Roanoke Memorial because they’re currently turning away patients. Could this be because it has, for years, blocked serious competition in its own back yard? A strong case can be made for exactly that.

Luckily, reform of our COPN laws is gaining steam and could happen next year. One bill, House Bill 2337 sponsored by Dr. John O’Bannon of the Richmond area, would eliminate the burdensome COPN process for operating rooms, NICUs and other important facilities and services. As noted by the FTC, that would mean quality care at lower out-of-pocket costs.

Let’s hope our state legislators get serious about COPN reform and remember that a supposedly nonprofit system like Carilion shouldn’t be able to fight against patients and other health care providers by using COPN laws to stifle competition and then want to expand services that are needed in the area.

Michael W. Thompson is the President of the Thomas Jefferson Institute for Public Policy. The opinions expressed here are his and do not necessarily reflect those of the organization or its Board of Directors. Mr. Thompson can be reached at [email protected]

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One response to “Carilion Wants It Both Ways

  1. so.. does Carilion have to provide care for those who can’t or won’t pay?

    how does this aspect play into their behavior in the COPN issue?

    If Carilion has to provide care for any and all comers.. then who is going to cover their costs for uncompensated care?

    I think if there is a plan for the Govt to make them whole on their uncompensated costs then I’d be totally on board with competition including the removal of COPN..

    but attacking just one side of this without even talking about reasons why Carilion might be behaving this way is not particularly useful.

    we need to honestly deal with the issue of hospitals, by law, having to treat anyone without being paid for it – … what would you expect those hospitas to do .. they have a responsibility NOT to go broke AND to have the quality and quantity of paid staff necessary to provide quality care to it’s community.

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