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Beaumont Sues Michigan's CON Commission Over Rejected Oxford Hospital Plans

Analysis  |  By Steven Porter  
   November 14, 2019

The parties have until next Friday to submit briefs on whether a preliminary injunction is needed. At issue is whether the state can change its interpretation of CON law standards.

Beaumont Health, based in Royal Oak, Michigan, filed a lawsuit this week against the state in an effort to salvage its plans for a 117-bed hospital in the village of Oxford, about 40 miles north of Detroit.

After the state identified the Oxford area as among six "limited access areas," pursuant to Michigan's Certificate of Need (CON) law, Beaumont filed an application last spring for approval to move forward with its hospital plans. Its prospects seemed promising after Henry Ford Health System's competing application was disqualified.

Beaumont's lawsuit—which was filed Tuesday in the Michigan Court of Claims against the state's CON commission and Department of Health and Human Services, according to court records—alleges, however, that officials changed their interpretation of Michigan's CON standards and said the relevant geographic area must have a population of at least 50,000 residents, as Gongwer News Services reported Tuesday. Officials rejected Beaumont's application because it didn't meet that threshold, the lawsuit alleges.

Beaumont requested a temporary restraining order (TRO) and preliminary injunction to keep the state from issuing new rules related to areas with limited hospital access. Judge Christopher Murray denied the TRO request but gave the parties until next Friday to submit briefs on whether he should issue a preliminary injunction, as Gongwer reported Wednesday.

In a statement released Thursday to HealthLeaders, a Beaumont spokesperson said the health system responded to the state's CON determination and fully intends to see its plans through.

"We remain committed to this project and will continue our efforts to provide health care in Oxford," the statement said. "We have land under agreement and we're eager to serve the community."

This comes after the Trump administration called on states to scale back or repeal their CON laws to boost competition.

"States initially adopted CON laws to further laudable policy goals, including cost control and access to care. The evidence to date, however, suggests that CON laws are frequently costly barriers to entry for healthcare providers rather than successful tools for controlling costs or improving healthcare quality," the administration said in a report last December, noting that the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division had already advised states to curb their CON laws.

A federal law passed in 1974 prompted states to enact CON laws. At one point, every state but Louisiana had done so, according to the National Conference of State Legislatures (NCSL). The federal law was repealed, however, in 1987, and states began modifying or repealing their CON laws as well. But most states still have some form of CON program on the books, according to the NCSL.

Related: Trump HHS Manifesto Seeks More Competition, Looser Regulation

Related: There's Something Worth Cheering in Florida. It's Not the CON Law's Repeal.

Related: 'Vast Majority' of Hospitals Don't Meet Volume Thresholds for High-Risk Surgeries

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.

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