Florida considers dropping certificate of need
Hospices object to opening markets to competition
Since the 1970s, health care providers in some states have been allowed operate and flourish relatively free from competition. Florida is the latest state to consider lifting barriers to competition by eliminating the certificate-of-need (CON) program. For now, however, intense lobbying by Florida’s hospice industry has led lawmakers to exempt hospices from the proposal to eliminate CONs.
For three decades, some health care providers had to obtain a CON from state authorities before setting up shop or expanding their programs into other areas. In Florida, one of the few states that still require CONs, lawmakers are considering doing away with the regulation in hopes of sparking competition. Competition, proponents argue, will give patients greater choice and force hospices to become more efficient and improve quality.
Not just hospices
The proposal to remove CONs was initiated in January by Florida’s Agency for Health Care Administration (AHCA), which oversees state health care policies. The proposed legislative changes not only affected hospices but hospitals, home health agencies, and nursing homes, as well.
But the Florida hospice industry opposed the measure, arguing that if isn’t broken, don’t fix it. "There’s no rationale for the proposal," says Lynne Mulder, MS, executive director of the Florida Hospices & Palliative Care Inc., a Tallahassee-based state hospice trade organization. "There is no analysis to show that by removing CONs it will increase access. It may actually limit access."
Through negotiations with state lawmakers, the industry was able have hospices removed from the measure, allowing them to continue operating under the CON requirement.
The certificate-of-need program has determined whether a health care provider can enter a market or expand into other markets. For years, states have limited competition to ensure quality care and financial stability of the providers. But the majority of states have done away with the requirement for a variety of reasons. According to the Hospice Association of America in Washington, DC, only 11 states had certificate of need requirements in 1998.
"It’s really a mixed bag as to why states do it," says Karen Woods, executive director of the Hospice Association of America. "It allows states the opportunity to screen programs and make sure the market doesn’t get flooded. This creates a burden for some states."
The proposed legislation is an example of changing attitudes about health care. Health care providers have long seen themselves as a community service, not a collection of business vying for customers. In some regions of Florida, hospices have been allowed to operate free from competition. Florida officials now want to see competition in one-hospice regions.
"You should have a choice between at least two," Scott Hopes, director of the Office of Health Policy for Florida’s Agency for Health Care Administration, told the Wall Street Journal. "I believe in more of a open-market system."
While the original proposal would affect all providers in Florida, hospices would be most affected. Florida has a small number of hospice programs in comparison to the number of patients it treats. In 1995, Florida had about 55,000 hospice patients, which was about 10% of the nation’s total. There are 2.66 hospice programs per 1 million in population, significantly less than the national average of 8.62 hospices per 1 million in population.
Given the number of patients and the small number of hospices available, state officials believe patients should be given more providers to choose from, particularly in areas where there is only one hospice program.
And not all hospices agree with Florida Hospices & Palliative Care. Catholic Hospice in Miami has aspirations to expand into neighboring Broward County, which already has four hospice providers. Despite the number of providers in Broward, leaders at Catholic Hospice believe the Catholic community is underserved.
"Competition is not embraced by the hospice industry," Anthony Palumbo, president of Catholic Hospice, told the Wall Street Journal.
Florida Hospices & Palliative Care was able to persuade lawmakers to amend the proposal by using the following arguments:
• Fixed price and fixed customer base are not characteristics of a free market.
Because payment rates are set by Medicare and Medicaid, and because hospices are limited to serving specific regions, two important components of competition would be impeded. Without the ability to set its own price or expand it customer base, the only alternative would be reduce cost by eliminating noncore services.
• Competition would limit offered services.
Using the certificate-of-need process to determine the entrance of a hospice into a market allows existing hospices to develop their programs beyond the core services mandated by the federal government.
"Hospices have been allowed to grow larger and flourish," Mulder says. "Larger hospices are able to offer additional services that smaller hospices cannot, such as residential care, community grief counseling, and children’s grief counseling even in cases when the deceased was not a hospice patient. Smaller hospices can’t do these things because they don’t have the efficiencies of larger hospices."
Because hospices must care for a fixed population for a fixed payment rate, hospices would be forced to eliminate additional services and focus only on required core services in order to remain economically viable.
• Hospice patients are not customers in the traditional sense.
While competition is based on customer choice, it is wrong to consider dying persons as consumers in the traditional sense because they cannot afford the luxury of a bad choice, the trade group wrote in its eight-page position paper.
"People who are dying are not as prone to shopping around and other health care customers," says Mulder. "Hospice is a community service, not a traditional business."
Rather than assuring quality care through competition, Mulder argues that legislative oversight is needed to protect terminally ill patients.
• Competition doesn’t guarantee increased access.
By limiting hospices’ ability to grow and add additional services, patients’ access to services beyond required core services would be adversely affected.
"Unlike other products and services, the number of persons who may choose hospice is determined by God, not by marketing," Mulder says. "Profit incentives should never be allowed or encouraged to top the list in this area of health care."
In addition to having to reduce programs in the face of competition, innovations and program improvements that were once openly shared among hospices statewide would become proprietary secrets of individual hospices.
• Evidence doesn’t support need for change in CON. Mulder argued that the AHCA would be using hospices and home health agencies as guinea pigs in an experiment with competition. She says the AHCA has not studied the impact the elimination of CON would have. Comparing Florida to other states without CONs is an unfair comparison, she says, because officials from those states likely don’t have first-hand knowledge of how hospices are allowed to grow and enhance their services.
"No other state with prior history of hospice regulation, a high demand for hospice services, and established significant programs that provide quality care and access for anyone who desires services, has eliminated CON review for hospice," the trade group wrote in its position paper. "Thus, there is no way to make a comparison of what could be the impact in Florida by making a comparison with other states."
A neutral stance
National hospice groups have little comment about Florida’s proposed CON changes. The Hospice Association of America, for example, remains neutral on the subject of competition and CON.
"We believe that [CON] is a matter for individual states to decide," says Woods.
David Abrams, senior vice president of the Miami-based Hospice Foundation of America, can see both sides of the debate. The hospice advocacy group does not have a position on the matter.
"On one hand, competition is good," Abrams says. "It’s capitalism, the American way. How can that be bad? On the other hand, the problem is the economic environment that hospices are in isn’t so good."
There is logic to the assumption that competition makes hospices more efficient and leads to improved quality, he says. But at what cost? Competition could pit small hospices against larger ones, jeopardizing the financial viability of smaller hospices. Consolidation is also a by-product of competition. "Then you’re back to where you started," Abrams says.
For Florida hospices, it’s now a wait-and-see situation. The Senate proposal is still waiting to be released from committee for a vote and the House has a similar bill awaiting a vote. There is still no guarantee that hospices will be added back to the proposal, Mulder says.
"For some reason, the Agency for Health Care Administration really wants hospice included," Mulder says.
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