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Regulatory Approval For Hospital Construction Hinders Competition

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The Tampa Tribune

Published: December 30, 2007

When state regulators decided South Bay Hospital in Sun City Center could move to a new location, they disappointed area residents and a competitor that also hopes to build a new hospital in Riverview.
Sun City residents are annoyed that they will have to drive seven miles up Interstate 75 to the new hospital, rather than putt-putt there on their golf carts.

And St. Joseph's Hospital is frustrated because officials there had hoped for years to build a south county hospital.

So is a new hospital in south Hillsborough a done deal? Hardly.

St. Joe's is likely to fight the deal by appealing the state's decision. Tampa General will likely rear its head, too, since it has opposed both competitors' proposals since the approval process began in 2005.

And therein lies the problem: The regulatory process created to tame costs and increase access is so slow, it has brought progress to a crawl.

The certificate-of-need program created by the Legislature to control the expansion of new hospitals and new hospital services has evolved into a drawn-out and expensive process that primarily benefits hospitals or hospital chains already in the game.

It's a process that's broken. Instead of fostering cooperation to improve our health care system, we have turf wars.
Territorial Imperative
The University of South Florida's Jay Wolfson, a professor of health law and finance, calls it "a territorial imperative." While hospitals may embrace competition as the core of capitalism, what they really want is as little competition as possible.

Take the south county hospital. Two years ago, the state didn't think there was a need for a new hospital there, ostensibly because the area didn't have the population to sustain it. Today, the state is of another mind. South Bay Hospital was given permission to move so long as it keeps an emergency room open at its current location.

But regulators do not believe there is a need for two new hospitals within blocks of each other. Fearing a duplication of services, they rejected St. Joe's application.

The question citizens should ask is whether the state really belongs in this fight.

Certainly two hospitals would be a waste of resources, especially since there are other hospitals not far away in Brandon and Tampa.

But would it hurt if both were built and one went under, except to the loser's bottom line? These are business decisions. Both South Bay and St. Joe's have lots of money behind them and are run by savvy people. Why should the state hinder competition?

It should not, which is why the regulatory process needs to change. Hospitals should not be allowed to keep the expansion plans of competitors on hold and in legal limbo for years on end.

Fortunately, Florida's top regulator has proposed changing - and perhaps eliminating - the laws that require regulatory approval.

"We don't want to have anti-competitiveness in our health care industry," said Andy Agwunobe, the physician who leads the Agency for Health Care Administration, during a meeting with health reporters last month.

Agwunobe says questions about quality, patient outcomes and safety - issues addressed in the current process - should not be key to awarding a certificate of need. Those issues belong in the licensure process, he said.

Architectural design, scope of services and staffing are irrelevant, too, when a hospital or health care chain has the financial resources to staff a new $250 million hospital.

A Fight In The Offing

Advocates of certificate-of-need laws argue that a surplus of health care facilities would duplicate services and increase operating costs. Those costs, in turn, would be passed on to insurance companies and patients through higher prices. By regulating the supply, they believe a surplus is avoided. The Florida Hospital Association promises to fight any attempt to change the status quo.

Ironically, when the CON process was first introduced, hospitals and hospital associations complained it would become a bureaucratic nightmare. Now they want to keep the process to ward off competitive pressures.

It's understandable that hospitals that have invested in staffing and infrastructure would be reluctant to face increased competition, but competition should make things better for everyone.

Today, the appeals process can take years and years, and hospitals or the chains that own them can afford to spend the money needed to sway the result or slow the process.

That's not how the system is supposed to work. In Tampa hospitals are full and emergency rooms are packed. Hospitals are looking for a way to address the challenges. They don't need - and patients don't want - a regulatory process that holds them back.

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