Some major Virginia hospital chains are campaigning hard to keep anti-competitive licensing laws on the books.
A central part of their argument: without state regulations to protect their bottom lines, they wouldn’t be able to offer charity care to those without insurance and might even have to shut their doors.
It’s a message being driven home by television ads aimed at Virginians and by lobbyists in Richmond. But data shows that hospitals’ concerns may be greatly exaggerated, with three of the state’s biggest nonprofit hospital chains pocketing hundreds of millions of dollars last year and paying substantial salaries to top executives.
They’re able to do that, in part, because of Virginia’s Certificate of Public Need licensing law, which gives the state broad power to organize the health care market and often results in large hospitals using their influence to shut competitors out of the market.
“Hospitals with local monopoly protection are gaming the system at the expense, quite literally, of their patients, and we are allowing it to continue,” State Del. Kathy Byron, R-Bedford, said Friday during debate on proposed licensing reforms.
The Virginia House of Delegates voted 50-47 on Friday to accept changes made to the bill by the committee. A final vote on passage could come as soon as Monday morning. If passed, the bill would move to the state Senate for consideration.
Hospitals are putting up a fight against the reforms.
The Virginia Hospital and Healthcare Association is running television ads across the state asking residents to call lawmakers’ and urge a negative vote on the bills. In the ad, a voice-over warns that the COPN reform legislation will “financially ruin your local hospitals, putting lives at risk.”
The advertisements are only part of the hospitals’ lobbying efforts. In a four-page letter to Gov. Terry McAuliffe dated Dec. 1, the VHHA paints a picture of an industry in dire need of government help.
The VHHA letter says declining state reimbursements, mandatory services provided to the poor and hospitals’ costs from subsidizing Medicare coverage threaten “serious harm to this key sector of Virginia’s economy. Virginia’s local hospitals and health systems simply cannot continue to absorb these reductions.”
Byron took to the House floor on Friday to dispel some of those assertions.
For example: Topline financial data filed with the IRS shows that Inova Health System, a dominant player in the northern Virginia market, reported a net gain of $513 million during 2013 and had $5.3 billion in assets at the end of fiscal 2013. The health system paid salaries of more than $500,000 to more than 20 top executives and spent more than $1.1 million on lobbying between 2010 and 2013.
Sentara Healthcare, which operates more than 100 health care facilities in Virginia and North Carolina, had a net gain of $117 million during 2013 and reported more than $1.4 billion in assets at the end of fiscal 2013, according to data filed with the IRS. At least 11 Sentara Healthcare officials made more than $500,000 that same year, the data shows.
“The hospital industry opposes the elimination of the anti-competitive Certificate of Public Need (COPN) because it says it can’t afford competition,” said Mike Thompson, president of the Thomas Jefferson Institute, a free market think tank based in Virginia. “The newly released financial numbers from the hospitals themselves clearly show this industry as a whole is doing very well. For it to say otherwise is simply not supported by the facts.”
Even mid-sized and smaller hospital chains are doing quite well in Virginia. Research from the Thomas Jefferson Institute shows hospitals in the state generated a profit margin of 10.7 percent during 2014 and a profit margin of 8.7 percent last year.
“COPN reform is about improving patient access to care, lower costs for care and not about protecting hospital financial bottom lines,” said Del. John O’Bannon, R-Henrico.
O’Bannon is the sponsor of one of the three COPN reform bills awaiting action on the floor of the Virginia House of Delegates. All three were voted out of committee last week and could receive a vote on final passage from the full House before the end of the week.
Of the three, O’Bannon’s bill is the most far-reaching. It would remove COPN regulations from many aspects of the state’s health care industry, including outpatient surgery centers, medical imaging facilities and other small-scale health services.
The bill also would implement recommendations from a special legislative commission aimed at streamlining the licensing process.