West Virginia Can’t Enforce New Hospital Rule

(CN) – A federal judge granted Marietta Memorial Hospital’s request for a preliminary injunction to prevent West Virginia from enacting new rules for ambulatory care facilities that Marietta claims unfairly advantages in-state hospitals.

West Virginia requires that a hospital seeking to introduce or remove various health services obtain approval from the defendant state Health Care Authority before proceeding.

Since 1977, the mechanism for approval is the state’s certificate of need program. Under the terms of the program, a hospital wishing to perform many health care services, including providing ambulatory care services, must first file a certificate of need application with the authority.

By law, the Health Care Authority is required to review the certificate of need application and to hold a hearing to consider testimony and evidence offered by interested parties.

In addition to defining what changes to services or facilities are covered by the certificate of need requirement, the state law also sets forth several exemptions.

In 2010, West Virginia’s legislature enacted an additional provision that exempted in-state hospitals from seeking a certificate of need “for the construction, development, acquisition or other establishment by a hospital of an ambulatory health care facility.”

But then, in June 2016, the legislature modified this exemption, providing West Virginia-licensed hospitals with a full-fledged exemption to the certificate of need process in regard to “[t]he construction, development, acquisition or other establishment … of an ambulatory health care facility in the county in which it is located and in a contiguous county within or outside this state …”

But unlike other rule exemptions enacted by the legislature, this one greatly curtailed other hospitals’ ability to object to the requested objection.

According to the Sept. 6 complaint with a federal judge in Charleston, the only review provided by this section is the ability of the exemption applicant to appeal an unfavorable decision “to the Office of Judges or refile the application with the authority.”

Marietta Memorial Hospital asserts the change has already created a marked disparity in the handling of in-state and out-of-state applications.

In its complaint, it says Camden-Clark Memorial Hospital, located in Huntington, West Virginia, is a large acute-care facility which is in direct competition with Marietta Memorial.

As recounted in the complaint, Camden-Clark Memorial filed a certificate of need application to develop a new ambulatory care facility and the purchase of a large, $9.8 million dollar primary care physician practice located nearby.

Marietta Memorial says it filed an “affected person” objection to requested exemption, but under the new rule, it was denied standing to file such a complaint.

It is arguing that this alleged differential treatment toward out-of-state hospitals renders the statute invalid under the dormant commerce clause and that the state of West Virginia cannot provide any “legitimate nondiscriminatory reason that an in-state licensed hospital should be exempt” from the certificate of need process.

The authority maintains legislative revision is not discriminatory because in-state hospitals “must provide virtually the same information that is required on a CON application through West Virginia licensure requirements and financial disclosure requirements.

“The exemption is simply saving the in-state hospital from having to produce this information twice; in essence, this exemption protects in-state hospitals against repetitions, that is all,” it says.

In granting Marietta Memorial’s request for a preliminary injunction, U.S. District Judge Thomas Johnston said the Health Care Authority is barred from automatically approving certificate of need applications filed by in-state hospitals relating to ambulatory health care facilities, and that it specifically take no further action on Camden-Clark Memorial’s application until the court reaches a final resolution in this matter.

In weighing the arguments of the parties to reach his decision, Johnston acknowledged that under the dormant commerce clause, states and local governments do have some ability to regulate interstate commerce, but only in so far as those regulations don’t place an undue burden on it.

“If a state law burdens interstate commerce, it violates the dormant commerce clause unless it is necessary to achieve a legitimate government purpose,” Johnston wrote.

“A law discriminating against out-of-state actors is presumed invalid unless the state government shows a legitimate local purpose and demonstrates that the discrimination is necessary to achieve that goal — that the purpose cannot be achieved through any less discriminatory method,” he added.

Johnston said based on the pleadings before him so far, Marietta Memorial is likely to succeed on its claim under the dormant commerce clause, and therefore a preliminary injunction is warranted.

“Because the state statute’s language explicitly allows an exemption for hospitals licensed in West Virginia while not affording the same exemption to out-of-state hospitals, it likely is discriminatory on its face,” he wrote, adding, “The presumption of invalidity may be rebutted if the State of West Virginia provides an important purpose and demonstrates that the discrimination is necessary to achieve that goal.”

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