Certificate of need task force hears from those in favor of repeal, moderate reform

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Members of a legislative task force created to weigh certificate of need laws in Kentucky heard presentations Monday from several speakers with different opinions on the issue.

Two people in favor of repeal, along with two who felt moderate reform but not outright appeal is necessary, spoke about the laws that govern where and how medical institutions can open and run their facilities in the state.

Representatives of Americans for Prosperity, a group that is critical of certificate of need laws, shared thoughts Monday during their presentations.

Melissa Fausz, government affairs director for Americans for Prosperity, contended in her presentation that certificate of need laws have failed to deliver on the promises of expanding healthcare access to patients and controlling healthcare costs.

“Market forces are incredibly effective at balancing the desire for affordability with the need for quality access, true choices and the kind of innovation and treatment and cures that is the hallmark of the American healthcare system,” Fausz said.

Representatives from St. Elizabeth, which some in the region say hold a monopoly on healthcare in the Northern Kentucky Region, presented favorable opinions on the laws but said they were open to moderate reforms.

The hospital argues they legally aren’t a monopoly but that they have been designated to have dominant healthcare status.  

St. Elizabeth’s Sarah Giolando said during her presentation that repealing certificate of need would not lead to better access for Kentuckians.

“It would simply invite outsiders into our state to cherry pick profitable business that would harm the existing healthcare systems providing safety net hospitals or services to their communities and those operating in rural markets, which are unlikely to see any new investment from a repeal of certificate of need,” said Giolando, the hospital’s senior vice president and chief strategy officer.

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The task force was created after two Northern Kentucky legislators filed bills in the 2023 legislative session to reform the requirement that health care institutions providing certain services must first prove there is a communal need for such services before they can establish facilities in an area.

Proponents of certificate of need laws claim that medical markets can become over-saturated in the absence of this type of regulation. On the other hand, opponents of certificate of need laws claim that it adds an extra layer of bureaucracy to an already administratively top-heavy sector.

Click here to learn more about certificate of need.

Monday was task force’s third meeting and the first time it had heard testimony from Americans for Prosperity. Previous meetings heard the testimony of the Kentucky Hospital Association and others who were broadly in favor of keeping certificate of need laws.

Americans for Prosperity is a national libertarian-leaning think tank that has lobbied against certificate of need both at the national level and at city meetings in the region. The organization gets much of its funding from the Koch brothers, fossil-fuel magnates who share the group’s libertarian politics.

Although Fausz said during her presentation that there were many challenges when it came to hospitals bringing in enough revenue to keep operating, “certificate of need is not the appropriate vehicle through which to address these challenges and in many cases, it is doing more harm than good.”

The task force also heard a presentation from Dr. John Garen, professor emeritus of economics at the University of Kentucky and affiliate of the Bluegrass Institute, another libertarian think-tank, although he said he was acting on his own.

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He told the task force that he had reviewed academic literature on certificate of need laws and their economic effects and came to the following conclusion:

“My assessment is that, reviewing the evidence, that the arguments in favor of certificate of need do not rebut its anti-competitive harmfulness,” Garen said. In other words, certificate of need requirements have the effect of suppressing economic competition, which leads to declining access and lower quality of care.

But St. Elizabeth’s Giolando argued that even though the hospital is one of the larger providers in Northern Kentucky, it is one player in a larger regional healthcare market that includes Greater Cincinnati and parts of Indiana.

Mark Guilfoyle, an attorney from DBL Law who also spoke on behalf of St. Elizabeth,  said that St. Elizabeth was for “rational modernization” of certificate of need laws, which would entail examining existing processes and reforming with a mind for efficiency and need, but the hospital was opposed to outright repeal of the law.

Sen. John Schickel (R-Union) asked Guilfoyle if St. Elizabeth would be opposed to reforming certificate of need laws if another full-service hospital tried to open up in the region.

Guilfoyle said that St. Elizabeth was taking in the majority of patients in the region who rely on Medicaid and Medicare or who, otherwise, can’t pay for themselves.

“So if you had another hospital that had that kind of a metric, then we wouldn’t be as concerned,” Guilfoyle said. “Now, there’d be other issues that we’d have to look at, but that’s the primary problem we have right there.”

Other task force members had questions for Garen and Fausz.

Sen. Karen Berg (D-Louisville) challenged Fausz’s methodology and asked who Americans for Prosperity had talked to as they crafted their argument.

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“Can you give me a list, please, of the stakeholders throughout the state that you talked to in-person before this whole committee was set up?” Berg said. “I would like that list so I can go back to them and understand exactly what their concerns are.”

She also didn’t think that the data and observations Americans for Prosperity furnished applied to Kentucky.

“Your argument is not making sense,” Berg said. “I think you need to tailor to this state a little more.”

Sen. Stephen Meredith (R-Leitchfield), whose district is largely rural and who formerly worked as the CEO of a hospital, said that certificate of need was a primary means by which people who relied on Medicaid and Medicare were able to access care, especially in rural areas where it can be difficult for medical facilities to turn a profit.

“Rural hospitals: the majority of our payer mix is Medicare and Medicaid,” Meredith said. “And with that, they do not cover the full cost of care. Medicare’s about 80% of the cost–not charges–cost, and Medicaid is significantly less than that.”

The risk, in his view, was the over-proliferation of facilities that cater to people with commercial insurance plans. By aiming at that patient population, the spread of such facilities can drive up prices, making it harder for hospitals who cater to the undeserved to stay afloat and provide services that other facilities won’t because they’re less likely to recoup their expense.

You can watch the full task force meeting, including presentations from Americans for Prosperity, Garen and St. Elizabeth at the Legislative Research Commission’s YouTube page.

The task force will meet again on Sept. 18.

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