by James C. Sherlock
Understanding the relationships between healthcare and government oversight in Virginia requires distinguishing between the business of healthcare and the practice of medicine.
In Virginia, the Department of Health regulates the practice of medicine. The State Corporation Commission regulates the business of health insurance. No agency of the administration has the authority to regulate the business activities of healthcare providers. The Attorneys General, who have the power to reign in the most obvious abuses, have looked the other way. Virginians have for generations paid the costs.
The Virginia Department of Health (VDH) has been responsible for the administration of Certificate of Public Need (COPN) since its inception in 1973. The law itself is bad enough without feckless administration. But without any legislative mandate to do so and at the urging of incumbents, VDH used COPN to create and protect regional monopolies everywhere but Richmond, where their employees live.
When really important COPN decisions were coming up for decision, the hospital systems were known to install their own executives to the post of Health Commissioner. (See Sentara’s win in 2008 of the biggest COPN decision ever as example.) The state-awarded monopolies in turn have created the most dominant regional economic and thus political powers in the state, its hospitals.
No attempt by various administrations, including the current one, to address the gap in administrative oversight has worked. Some recent examples:
- Last year a bill tasked the State Corporation Commission to deal with the balance-billing issue. When the SCC proposed a rule that required hospitals simply to notify non-emergency patients of the potential for out-of-network charges, the hospitals declared that the Department of Health was their regulator, not the SCC. The Department of Health, of course, has no authority to regulate hospitals’ business activities.
- The 2019 Appropriation Act[1] tasked the Secretary of Health and Human Resources to convene a workgroup to establish “equitable and fair reimbursement” for health care providers in balance- billing situations. “The Workgroup did not reach consensus for a specific recommendation.”[2] There are three streams of revenue in play — for hospitals, independent providers and insurers. Virginia’s hospitals will always win such a discussion or leave the table.
- Last summer Governor Ralph Northam convened a workgroup led by a professional mediator to come up with consensus COPN reform. A wide range of stakeholders were represented at very senior levels. The Governor kicked it off personally. Secretary of Health and Human Services Daniel Carey attended subsequent sessions. To make a very long story short, at the end of what was supposed to be a set of meetings with a report of consensus, the hospital representatives walked away and did not return. Why should hospitals compromise on COPN when they own the process?
So, the message to the Governor and the Secretary from the hospital leaders is unmistakable. Hospitals will advise the government when they wish for state action. With the change in control of the General Assembly in 2020, the industry saw an opportunity to strengthen its grip.
I wrote earlier about the identical bills carried by Sen. George Barker, D-Alexandria, and Del. Mark Sickles, D-Alexandria. They dance when the hospitals hum a tune. The bills will strengthen COPN to prevent any semblance of future competition. They will also result in the closure of some existing independent ambulatory surgery centers.
Beyond COPN, every bill remaining in the 2020 General Assembly docket that addresses healthcare costs solves every perceived problem by making the insurers pay for their solutions. The list includes balance billing and tens of millions of dollars to shift the ACA marketplace from the federal website to a new state website. No details beyond vague slogans are offered on why a state website would be a good thing. Insurers don’t really pay for such state charges, their insured ultimately do. These bills are stealth taxes. How long will it be before major health insurers refuse to write policies in Virginia? That, of course, is the desired outcome for hospitals with captive insurers.
The strong-arm actions by some of the regional monopolies aimed at weak competition and the monopoly-enabled overcharging of patients have been completely ignored. This behavior has been reported again and again in the press, by the Department of Justice and Federal Trade Commission in a joint report to the General Assembly and by peer-reviewed academic studies. It continues to occur in plain sight.
The administrative power of the state is under the iron control of its hospitals. And hospital monopolies are effectively protected from federal antitrust laws under what is termed the state action doctrine.
However, state attorneys general have no such limits. The Commonwealth awarded the monopolies. It did not authorize them to use that market power illegally. The constitutional officer in Virginia with the authority to prosecute businesses acting illegally is Attorney General Mark Herring.
The purpose of the Virginia Antitrust Act is:
is to promote the free market system in the economy of this Commonwealth by prohibiting restraints of trade and monopolistic practices that act or tend to act to decrease competition. This chapter shall be construed in accordance with the legislative purpose to implement fully the Commonwealth’s police power to regulate commerce.”[3]
Yet for decades Virginia Attorneys General have express no interest in Virginia’s regionally dominant hospital systems. Not one has used the state antitrust laws to tame monopolistic behavior. Perhaps that’s because Virginia’s AGs, wishing to become governor, did not want to cross the politically powerful hospitals.
Herring wants to be governor. He can earn the position by enforcing the Virginia Antitrust Act. Or he can neglect antitrust issues and be held accountable by the people of Virginia.
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.
2019 Appropriation Act, Item 21F
[2] https://rga.lis.virginia.gov/Published/2020/RD64
[3] Code of Virginia, Virginia Antitrust Act § 59.1-9.2.
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