Certificate of Need on Mergers and Affiliations

The Department of Health recently made changes to the way it will perform its Certificate of Need reviews for hospitals and other health care providers. This page is designed to answer some questions about the change and to provide links to all the relevant documents.

NEW! Court rules with hospitals against new CN rule affecting affiliations

Click here to learn about new hospital licensing rules around the posting of hospital policies.

Click here to read about WSHA's lawsuit over the new Certificate of Need rules

Q: What is Certificate of Need?

The Certificate of Need (CON) law is a state law requires the Department of Health to review certain service expansions to make sure there are not too many competing services in one area. According to the state’s website, “The Certificate of Need process is intended to help ensure that facilities and new services proposed by healthcare providers are needed for quality patient care within a particular region or community.”

In other words, Certificate of Need is a permit process for new health care services and facilities. According to a legislative audit, the Department of Health reviews proposals for certain health care facilities and services to ensure they:

  • Meet a community need;
  • Will provide quality health care services;
  • Are financially feasible; and
  • Will foster containment of health care costs.

Some people like CON because it helps existing providers be more financially stable by keeping competitors out of the service area. Other people don’t like it because the review process can be long and unpredictable, making it hard to expand to meet new service needs.

For about the last 20 years, the Department of Health (DOH) reviewed the sale, purchase, or lease of a hospital according to the plain language of Certificate of Need law calling for review of a “sale, purchase or lease.” Other changes in control, such as mergers and affiliations, did not change the services available, so according to the DOH did not need new Certificates of Need.

Q: So what’s changing?

The CON law has not changed at all, but the Washington State Department of Health has re-interpreted the law and rewritten its rules and will now review all “changes in control” of any “part” of a hospital—even if there aren’t any changes to the services available.

This will require more hospitals and other health providers to go through a long, expensive, unpredictable permitting process that doesn’t do anything to improve patients’ access to services. For example, if physicians from one hospital go to another hospital to run a particular special service such as a neonatal intensive care unit, or if a hospital outsources the operation of a department like human resources, those business decisions may now be subject to state review.

Q: How else can we keep consumer choice in health care?

The purpose of the Certificate of Need law is to reduce competition—not increase it. But there are still laws that protect consumer choices, such as anti-trust laws. There is also a hospital conversion statute that governs the transfer of a nonprofit hospital to a for-profit owner.

However, it’s important to understand that the most dramatic impact on consumer choices about hospital services would be if a hospital has to close or close services.

Q: Why do hospitals need to merge or affiliate?

There are a many reasons why some hospitals may look to affiliate with another hospital or a health system. Affiliations and partnerships can:

  1. Make it easier to coordinate care between hospitals, long-term care facilities, and physicians;
  2. Help update buildings and patient rooms, expand services, or invest in new technology;
  3. Provide the resources to recruit and retain top-quality physicians, nurses and technicians;
  4. Reduce administrative costs by sharing payroll, billing, record-keeping services or electronic medical records.

Read this fact sheet for more information.

Q: How have mergers affected the kinds of reproductive services that are available?

It’s important to be as specific as possible when talking about “reproductive services.” There is a broad range of services that fall under that umbrella. Some of those services happen in a hospital, but many don’t. For example, 93% of births in Washington state happen in a hospital, but only about 1% of abortions.

According to a report from the state, which sought to answer this very question, mergers with Catholic health systems have had no impact on people’s access to tubal ligation, abortion, and death with dignity services. The Office of Financial Management (OFM) did a study, and they found that there are not significant detectable impacts on access to care with respect to tubal ligation, abortion, and death with dignity services. Nor have there been reported instances of discrimination in Washington State hospitals against LGBT populations in the last five years.

Read the report here: http://www.ofm.wa.gov/healthcare/access_to_care/default.asp

Q: What about Death With Dignity?

The Death With Dignity Act was passed by a vote of the people in 2009. It allows terminally ill adults to request and self-administer lethal medications prescribed by a physician. This is a choice that is between the patient and their physician. It is not a hospital service. In addition, the Act’s conscience clause allows any provider to choose not to participate. For more information on Death With Dignity, visit this page (link).

WSHA and the Washington State Medical Association encourage patients, families and physicians to talk about end of life care. More information can be found here.

The OFM also looked for data that would indicate that access to Death With Dignity services were affected. Although data is very difficult to obtain, the report stated: “Given the little information we do have, it does not appear as though the western half of Washington, which is largely served by religious hospice agencies, has utilized the DWD end-of-life choice less than those on the east side.”

Q: I heard that some hospitals discriminate against LGBT families. Is that true?

Discrimination against families is against the law and the values held by Washington hospitals to serve all who seek health care. We were glad to see that there have been no reported instances of discrimination against LGBT populations in the last five years in any hospital in our state. Our members are committed to ensuring that no family is ever discriminated against, whether they are in a religious or a secular hospital.

To ensure all patients and families feel welcome in Washington state hospitals, we are working jointly with the Governor to ensure that hospitals have effective policies and good staff training.

Documents

Press Release Regarding WSHA's Petition to Invalidate New CON Rules (February 13, 2014)

Petition to Thurston County Superior Court (February 13, 2014)

WSHA Comments on OFM Study: January 14

Note: In light of the policy collection by the state, AWPHD will not be doing a survey at this time.

DOH releases final rule adoption: December 24

This is the CR103 WSR 14-02-040.

DOH release public hearing summary with Department response: December 24

Office of Financial Management Study: “A preliminary assessment of the data available regarding the effects of hospital mergers” 

The Office of Financial Management (OFM) did a study, and they found that there are not significant detectable impacts on access to care with respect to tubal ligation, abortion, and death with dignity services. Nor have there been reported instances of discrimination in Washington State hospitals against LGBT populations in the last five years.

WSHA comments from November 26, 2013

WSHA continues to object to the proposed requirement for CON review of many more transactions as contrary to law and decades of precedent, and has serious concerns about the intersection of these proposed rules with conscience clauses. WSHA also continues to have major questions about the effectiveness of the Certificate of Need program and the plan to collect hospital policies as ways to achieve the Department’s goals, and asks the Department a number of questions about its plans.

WSHA comments from September 10, 2013

The comments describe why mergers and affiliations are happening, object to the proposed requirement for CON review of many more transactions as contrary to law and decades of precedent, describe the intersection of these proposed rules with conscience clauses and religious freedom, raise questions about the workability and usefulness of policy collection, and stress the role of other branches of government.

Legislative Audit of the Certificate of Need Program

In 2005, the Legislature directed the Joint Legislative Audit and Review Committee (JLARC) to conduct a performance audit of the Department of Health’s (DOH) administration and implementation of the Certificate of Need Program. The same bill created a task force to study and prepare recommendations on improving and updating the state’s Certificate of Need Program and to consider the results of JLARC's audit in developing its recommendations.

Contact

Mary Kay Clunies-Ross update

Mary Kay Clunies-Ross
(206) 216-2894