Feds call for eliminating Illinois law regulating hospitals' construction

Two federal agencies are calling for the elimination of an Illinois law regulating hospital construction and expansions, saying it shortchanges consumers by weakening competition that would help control health-care costs.

A joint statement released Monday by the U.S. Department of Justice and the Federal Trade Commission says "certificate-of-need laws are a regulatory barrier to entry" for competitors who could offer higher-quality services than existing health-care providers.

The agencies suggest states let the free market decide what gets built, which some states have done by repealing or scaling back similar laws.

A U.S. Department of Justice representative testified Monday before the Illinois Task Force on Heath Planning Reform, which is evaluating the state's certificate-of-need requirements.

The task force also is trying to determine whether the Health Facilities Planning Board, which applies the law, is needed amid criticism over the board's susceptibility to corruption and influence.

Critics frustrated with Illinois' regulatory process welcome the agencies' call for eliminating CON requirements entirely, saying it has unfairly scuttled many new hospitals proposed for the suburbs.

"Where there is a market for a product, that market should be met," said Plainfield Mayor James Waldorf, who is still sore about the state's rejection of Naperville's Edward Hospital's plans to build a new $246 million facility in Plainfield. "We've provided 30,000 plus signatures in support of the hospital. We've also had expert testimony about the need for a hospital in Plainfield and that, too, has been ignored."

Edward's proposal has been back-and-forth in various forms before the facilities planning board since 2003 and was most recently denied in August.

"We plan to modify the proposal and be back in front of the board hopefully by the end of this year," said Brian Davis, Edward's vice president of marketing.

Meanwhile, Lake County officials are poised for the rejection of what would have been the area's first new hospital in 30 years. This Wednesday, the Health Facilities Planning Board will likely give the final word on Vista Health's proposal to build a 140-bed, $100 million hospital in Lindenhurst.

The state's certificate-of-need application process has been much criticized for being bureaucratic and expensive.

"Hospitals or health-care agencies are forced to hire attorneys to see them through the process," said state Sen. Susan Garrett, a Lake Forest Democrat and task force co-chair. "It's horribly unfair. The process can't be cost prohibitive."

Yet, Garrett said, lawmakers probably won't get rid of the health facilities planning board or eliminate the CON process entirely.

"It seems unlikely that we would remove our oversight of these massive health expenditures, especially during a time when the economy is going through a downturn," she said.

Garrett said though the free market idea sounds good in theory, there is no evidence that states without such laws have seen lower health-care costs or an increase in access.

But fellow task force member state Sen. Bill Brady, a Republican from downstate Bloomington, said the fact that half the states in the nation have done away with certificate-of-need laws offers a valid argument against the process.

He added the recent convictions of a facilities planning board member and a former political fundraiser for accepting kickbacks from a construction company should give lawmakers pause.

Historically, most states adopted certificate-of-need laws to cap or limit runaway health-care spending and market over-saturation.

Federal authorities say the pendulum has swung too far.

"An incumbent provider can use the process itself to raise the cost of entry to delay the entry of prospective competitors," said Daniel Gilman, attorney and adviser for the Federal Trade Commission's Office of Policy Planning. "It can lengthen (the regulatory process) by years."

Proponents say maintaining state regulation of growth in health-care facilities is the only way to ensure the poorest populations get served.

"When you look at some of the states where there is no health facilities planning, you find hospitals moving out of many of those challenged areas," said Howard Peters, Illinois Hospital Association senior vice president for government relations. "If you make it more difficult by saying that profiteers can cherry-pick, you take away all of those incentives of those hospitals to continue to struggle to try and stay in those communities."