Antitrust Agencies Say Alaska Health Policy Stifles Competition

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By Liz Crampton

Federal antitrust officials on April 12 urged Alaska lawmakers to repeal the state’s program requiring health-care providers to obtain state approval before expanding.

At the request of a state lawmaker, the Justice Department and the Federal Trade Commission weighed in, saying the restrictions can harm competition by limiting the availability of new health care services. Alaska Sen. David Wilson (R) is sponsoring legislation to repeal the program.

“Certificate of Need,” or CON, health laws exist in many states, and federal antitrust officials generally dislike them. The comments released April 12 are the latest example of the DOJ and the FTC speaking out. The agencies say such laws can circumvent federal antitrust authority. The FTC and DOJ have engaged in a long campaign in opposition to these laws in states like New York and Illinois.

Alaska rules require health-care providers to seek state approval before building new facilities, offering new services or making large capital expenditures. The goal is to contain health-care costs that could be passed on to the consumer.

Impedes Federal Enforcement

State laws attempting to manage the health industry can get in the way of federal enforcers’ attempts to maintain a competitive environment. Last July, the FTC had to withdraw a lawsuit to block a merger of two West Virginia hospitals after the providers received CON approval. Then the state passed a separate law effectively exempting the merged entity from antitrust liability.

The FTC and DOJ say such laws interfere with market forces that determine the supply of facilities and services. They can “suppress supply, misallocate resources, and shield incumbent health-care providers from competition from new entrants,” the two agencies said in the April 12 statement.

Specifically, the Alaska program raises the cost of entry for new providers and inflates the cost of expansion by adding time, uncertainty and cost to the approval process, officials said.

‘70s-Era Law

A spokeswoman for Alaska’s Department of Health and Social Services, which reviews CON applications, said the department isn’t recommending any changes to the CON program and is “neutral” on Wilson’s bill.

CON programs have been around since the 1970s to prevent hospitals and nursing homes from buying unnecessary equipment by regulating the number of beds in those facilities, according to the National Conference of State Legislatures.

At the time, the government mandated that states have health-care regulatory bodies in place to grant approvals before any major capital project took place. That law was repealed in 1987, along with federal funding for those programs. In the aftermath, 14 states repealed their CON programs, but 34 states still have them on the books. New Hampshire became the latest to roll back its program last year.

Several Months of Delay

Under current Alaska law, a provider must obtain CON approval before spending $1.5 million or more to expand or build new facilities. Parties must submit an application with a fee ranging from $2,500 to $75,000 to the state health department, kicking off an approval process that spans several months.

After an approval is granted, a person or group “substantially affected” by the action can initiate an administrative proceeding to oppose it, lengthening the process.

The FTC and DOJ said the Alaska program also reduces the competitive pressures that incentivize providers to innovate and improve services. Further, in the event a CON is denied, it prohibits entry or expansion, they said.

To contact the reporter on this story: Liz Crampton in Washington at lcrampton@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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