Lawmakers Will Consider Relaxing Certificate of Need Law

Critics say what was designed as an efficiency mechanism has become a tool that protects entrenched interests.

The Nichols family, featured in a 2022 cover story. (Tim Saputo)

The House Committee on Behavioral Health and Health Care will hold its first hearing today on House Bill 4139, aimed at reducing the barriers to opening new health care facilities.

Like 34 other states, Oregon requires any company that wants to establish a new hospital or various types of medical facilities to apply to the Oregon Health Authority for a “certificate of need.” Oregon adopted the certificate of need process in 1971. The law, according to OHA, “arose out of the Legislature’s desire to achieve reasonable access to quality health care at a reasonable cost.”

The idea was to avoid overcapacity and also to discourage new market entrants that might skim more lucrative privately insured patients off the top, leaving existing providers to serve less lucrative Medicaid and Medicare patients.

But in recent years, critics say, the operators of existing facilities have used the certificate of need process to stymie competition. Last year, WW reported on Oregon’s shortage of acute rehabilitation beds, which serve patients who have suffered strokes, traumatic brain injuries, spinal cord injuries, and other physical trauma that may require continued specialized treatment after hospitalization.

Related: Oregon Provides Hardly Any Rehab Beds for Patients With Brain Injuries. Powerful Interests Want to Keep It That Way.

Oregon offers one of the lowest number of inpatient rehabilitation beds per capita in the nation, ranking 49th, ahead of only Hawaii. But when two national operators of such facilities proposed to build new, standalone 50-bed rehab facilities, one in Clackamas County and one in Washington County, Legacy Health (the operator of the state’s largest rehab facility) and the Oregon Health Care Association, which represents nursing homes, challenged the need for them in OHA’s certificate of need process. The opponents tied up the new applicants for about four years. When, after long-contested cases, OHA finally ruled that Oregon needed both, Legacy and and OHCA appealed to the notoriously backlogged Oregon Court of Appeals. Before the court could rule, both applicants dropped out.

Dr. Martin Bomalaski, a Portland rehabilitation physician, sketched out his concerns in prepared testimony for today’s hearing. “Two major projects to build new inpatient rehabilitation facilities in the Portland metro area have been abandoned in the past year explicitly because of abuses to the certificate of need process, including endless petitions from competing interests, which makes getting final approval for these vital projects effectively impossible,” Bomalaski testified. “The end result is that patients with these devastating conditions either receive subpar rehabilitation or must travel out of state to receive the specialized services they deserve.”

Now, state Rep. Lucetta Elmer (R-McMinnville), the chief sponsor of HB 4139, along with Rep. Cyrus Javadi (R-Tillamook), wants the state to consider dropping the certificate of need requirement for rehab, psychiatric and substance use disorder facilities.

From their heyday in the 1970s, certificate of need laws have lost support because some analyses show they reduce the availability of service and raise prices. Florida dumped its certificate of need process in 2019; New Hampshire did so in 2016, following more than a dozen states that did so earlier, according to a 2020 National Institute of Health review of research into the practice.

Elmer says she learned about the barrier that certificates of need can create from the 2023 legislative testimony of Dave Nichols and his mother Kathryn, who were featured in WW’s cover story. When Dave Nichols, a young Boeing engineer then living in the Seattle area, suffered a traumatic brain injury in a 2017 climbing accident, his parents could not find a rehab bed for him in Oregon, where he grew up and they live. Instead, the family took him to a Colorado facility that specializes in rehab for brain injuries.

The Nichols’ testimony contributed to the passage of a bill expanding funding and services for people who, like Dave Nichols, have suffered traumatic brain injuries. But Elmer wanted to do more—she wanted the state to think hard about whether the certificate of need process was fulfilling framers’ goal of providing more efficient, effective service. Elmer introduced a bill on the topic last year and has refined that bill this year.

“Oregon is in desperate need of more inpatient beds,” Elmer says. “Patients are being discharged from acute care hospitals back home where they will undoubtedly relapse because of the lack of inpatient beds. I recognize that community-based beds and resources are also needed down the line, but what good are these services if patients are stuck in the cycle of being readmitted to the hospital or staying on the streets without the care that they need?”

The Committee on Behavioral Health and Health Care will hear Elmer’s bill in a session that begins at 5 pm today.

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