Despite an attack that went up to the Georgia Supreme Court, it appears that the State’s Certificate of Need (CON) law will live to see another day. On October 16, 2017, the Georgia Supreme Court issued an opinion written by Justice Harold Melton upholding the law, finding that the CON laws serve a legitimate state interest in ensuring that health care services are distributed reasonably and economically.
The case began in 2014, when the Georgia Advanced Surgery Center for Women in Cartersville sought to add a second operating room to their outpatient surgery center. The Department of Community Health (DCH) denied the CON request, finding that the surgery center and other ambulatory surgery centers in the area had excess capacity that would therefore result in the unnecessary duplication of services.
The surgery center sued DCH, seeking a declaration that the CON law is unconstitutional. Specifically, the surgery center argued that the CON law violates the Anti-Competitive Contracts clause of the Georgia Constitution, and violates the due process clause of the Georgia and U.S. Constitutions.
The Court held that the Anti-Competitive Contracts clause did not apply to the CON law because the clause is “limited expressly to contracts and agreements.” The opinion states, “By its plain terms, OCGA § 31-6-40(a)(7)(c) does not authorize monopolistic ’contracts’ relating to providers of new institutional health services. It only requires that all such providers obtain a CON before adding new services.”
The high court then dismissed the center’s due process challenges since prior decisions had upheld the CON law as serving a legitimate state interest and not arbitrary or discriminatory. The opinion noted that health care is unlike other businesses in that it is an industry that is heavily regulated by both the state and federal government. “Nothing in today’s opinion should be understood to support sweeping economic regulation of this sort beyond this unique context,” the Court said in a footnote.
Although the Court disagreed with the center’s constitutional challenges, it did agree that the center had standing to pursue a declaratory action. DCH had argued that the center must first exhaust its administrative remedies before filing a declaratory action. The Court, however, found that the center had “imminent plans to add a second operating room” and the center had already been denied a CON for this same proposed expansion in 2014. Thus, the center was faced with the prospect of either punishment if it expands its facilities without a CON or enduring much expense and effort to obtain the new CON. Additionally, because the center was bringing a facial challenge to a statute, it was not required to exhaust administrative remedies.
Georgia’s CON law requires hospitals and certain other medical providers to obtain clearance from DCH before opening a new facility, expanding or adding certain medical equipment. Since its passage in 1979, the CON laws have been subject to much litigation and constitutional attack as well as the subject of much lobbying and consideration at the legislative level.
Recently the Cancer Treatment Centers of America (CTCA) have been pushing for legislative changes to the CON process to allow it to expand. While Georgia typically requires hospitals go through the CON process, in 2008 the General Assembly allowed CTCA to open its facility without doing so because it would be a “destination hospital” that would draw patients to Georgia. As such, lawmakers limited it to 50 beds and required that at least 65 percent of its patients come from outside the state. To expand, CTCA must secure changes to the CON laws.
CTCA also attempted in 2015 to expand beyond the 35% in-state patient cap by petitioning for DCH rule-change. The rule-change would have allowed it to become a general acute care hospital not subject to the in-state patient cap. Amidst uproar from State lawmakers and hospital lobbies who opposed the change, DCH eventually tabled the rule change. The lobbying and push for legislative change, however, are not likely to subside in the next legislative session.
For now, at least with respect to the arguments raised in this case, the constitutional debate has been settled, and Georgia’s CON laws will live to see another day.
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