Appeals Court Upholds Virginia’s Health Care Monopoly

Federal Appellate Court Lets Virginia Lock Out New Health Care Investment

Richmond, Va.—Today, the 4th U.S. Circuit Court of Appeals issued a ruling rejecting a long-running constitutional challenge to Virginia’s so-called “certificate of need” (or CON) requirement. The requirement makes it illegal to make certain kinds of medical investments, like buying a new CT scanner, without first proving to state officials that the investment is “necessary.” The lawsuit, originally filed in 2012, was brought by the Institute for Justice on behalf of a group of medical doctors who wanted to bring new health care services into Virginia, but found themselves locked out by the state’s expensive, unpredictable and protectionist application procedures.

“Today’s ruling means fewer health care services and higher prices for Virginians,” said IJ Attorney Darpana Sheth. “It also means fewer opportunities for health care entrepreneurs. As a result, Virginia law will continue to prevent private citizens from using their own money to fund innovative and effective health care services.”

The court’s ruling acknowledged potential flaws in Virginia’s law, including “the basic economic maxim that barriers to entry like CON programs may reduce competition and thereby allow entrenched incumbents to exert market power and charge inefficiently high prices,” but refused to strike down the law and suggested instead that “the Virginia General Assembly, not a panel of unelected federal judges” should solve the problem.

“Virginia has one of the worst CON programs in the country,” explained IJ Senior Attorney Robert McNamara, “It requires what amounts to full-blown litigation just to buy a low-cost CT scanner. The program left in place by today’s ruling amounts to nothing more than a certificate of monopoly for favored established businesses, which comes at enormous cost to ordinary Virginians.”

Today’s ruling comes in the midst of ongoing fights over Virginia’s CON program.  In October, the Federal Trade Commission and the Department of Justice’s Antitrust Division issued a joint statement that was highly critical of Virginia’s law.  At the time, FTC Chairwoman Edith Ramirez said that the agencies were concerned that laws like Virginia’s “may facilitate anticompetitive mergers and conduct that raise prices for consumers and reduce their access to new sources of care.”  And in December, three members of the Virginia House of Delegates introduced legislation that would repeal many of Virginia’s CON requirements.  That legislation is pending.

“Patients and doctors—not the government—are in the best position to decide what medical services and equipment are needed,” concluded Sheth.  “We remain committed to obtaining health care freedom and economic liberty in Virginia and across the country.”

For more information about the case, visit: http://ij.org/case/vacon-2/

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