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Analysis

Henry Ford Health System's Hospital Plans Trip Over Certificate-of-Need Law

By Steven Porter  
   March 21, 2019

Michigan officials say they're reviewing only one application, from Beaumont Health, because Henry Ford's application didn't adhere to administrative rules.

Two health systems in Michigan have asked state officials to authorize their competing plans to build a hospital in Oxford, a village about 40 miles north of Detroit.

Only one of the systems can be chosen, pursuant to Michigan's certificate of need (CON) law, and the deciding factor could come down to how well each competitor adhered to administrative rules stemming from the law. The case highlights a long-running dispute over how much the state and federal government should do to influence healthcare competition and whether that interference is beneficial.

Henry Ford Health System, based in Detroit, and Beaumont Health, based in Dearborn, each submitted an application to the Michigan Department of Health and Human Services after a biennial review of the state's hospital needs last fall identified the Oxford area as among six "limited access areas" across the state, as The Detroit News' Breana Noble reported. The review determined the Oxford area lacked 117 hospital beds.

Henry Ford proposed to build a 116-bed hospital, and Beaumont proposed to build a 117-bed hospital. But there was a problem with Henry Ford's application. It didn't adhere to all of the state's administrative rules, a department spokesperson told local media.

Beaumont's application did follow all of the rules, so it is currently under review, as the spokesperson told the Detroit Free Press' JC Reindl. Henry Ford can reapply in the future, but if the state authorizes Beaumont's plan, it would preclude Henry Ford from building an Oxford hospital.

The department accepts certificate-of-need applications on only three days per year: once each in February, June, and October, as The Detroit News reported.

A spokesperson for Henry Ford pushed back a bit against the state's determination, saying the Detroit-based system will continue to speak with state regulators about its application.

"We did in fact submit a (certificate of need) application by the Feb. 1 deadline, and [we] are confident that the state will have strong interest in our approach to meeting the needs of the community," the spokesperson told the Free Press.

This episode 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.

Last year, the FTC formally urged Alaska lawmakers to repeal the state's CON law.

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 there are still 35 states with some form of CON program on the books.

A push to repeal Florida's CON law stalled this week, as the South Florida Sun Sentinel reported.

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


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