General Assembly Aims To Remake Healthcare Delivery Model

This week’s Courier Herald column:

While most of Georgia is preparing for holidays, Georgia’s legislators are preparing for the 2019 meeting of the Georgia General Assembly which begins next month.  They are meeting this week in Athens for the “Biennial”, an orientation for new members and an overview of selected topics and policy issues which they face when they gather in Atlanta.

The table has been set by the final report of the House Rural Development Council that has spent two years formulating policy recommendations for rural Georgia.  Considering that the council is co-chaired by Appropriations Chairman Terry England (whose committee proposes the budget) and Ways and Means Chairman Jay Powell (whose committee oversees tax policy), it would be wise to read and understand the direct and implied recommendations in the report as a marker for things to come.

On health care, the specific recommendations include the declaration that the state’s current Certificate of Need (CON) process should be “revolutionized” and replaced with a system of accreditation and licensing requirements for providers.  The unwritten but clearly implied message is that hospitals in Georgia are a combination of the haves and have-nots, and there is concern that some of the more prosperous systems are using their “non-profit” status to create anti-competitive monopolies that extend to businesses ventures outside of their core mission.

In more plain English, the current system of licensing hospitals requires a Certificate of Need to be issued for most hospital services to be delivered.  This system was designed when most care covered in hospitals was reimbursed on a “cost plus” basis, and was instituted to keep hospitals from providing more service than was necessary.   

Now, insurance companies and Medicare/Medicaid cost reimbursement policies mostly control the caps on costs, so the Certificate of Need serves more to establish anti-competitive monopolies rather than to act to contain costs.   In an era where much of the state needs more hospital coverage rather than less, CON seems to have outlived its purpose.

In exchange for relaxing and/or removing CON’s requirements that hospitals deliver a comprehensive slate of services, “specialty” service providers (think oncology treatment and other services that don’t lose a hospital money) are proposed to increase their requirement for indigent care from 3% of patients to 10%.  As for the existing, healthy and expanding non-profit hospitals, there are a few warnings.

The RDC isn’t happy with the practice of non-profit hospitals purchasing “medical use rights” from surrounding property owners/landlords.  This is where hospitals purchase the exclusive right to provide healthcare services in nearby shopping centers, effectively eliminating the threat that competing providers would locate near them.  There’s also a recommendation that non-profits have to declare property owned and whether or not it is being used as part of the hospital’s core mission, and thus whether it has been properly removed from local property tax rolls. 

In addition, there’s a concern that the non-profit hospitals, without shareholders receiving or expecting a return on investment, may instead shift that ROI to executive compensation.  One of the proposals is that each non-profit hospital disclose the executive compensation for the total salaries and compensation packages for executive leadership positions.  Additional transparency for non-profit hospitals would be new legislation that any and all subsidiaries owned by hospital authorities and foundations be subject to Georgia’s open records requirements.

Overall, the proposals of the Rural Development Council show that a legislature which has long talked about “free market” reforms must recognize that CON laws establish anything but a free market.  Quite the contrary, the current system allows a select few to prosper while acting in anti-competitive ways, ultimately reducing the overall supply of medical services to the Georgia market.

It’s well known that there are fundamental problems with the structure of healthcare services delivery in Georgia.  The RDC recommendations suggest it is time to stop doing the same things over and over and expect a different result.