Medical Professionals File Major Federal Health Care Lawsuit Against Virginia

J. Justin Wilson
J. Justin Wilson · June 5, 2012

Arlington, Va.—Should Virginia be restricting patients’ medical options simply to line the pockets of politically connected businesses?

That is the question posed by a coalition of medical professionals who today joined forces with the Institute for Justice to file a major federal lawsuit demanding that Virginia stop shutting out new medical services for no reason beyond protecting the profit margins of existing businesses.

The target of the lawsuit is Virginia’s certificate of need (or CON) program, which actually makes it illegal to offer new medical services or purchase certain types of medical equipment without first obtaining a special permission slip from the government. Under the program, licensed medical professionals who want to offer new services must first persuade government officials that their new service will be “needed”—and they must do so in a process that verges on full-blown litigation in which existing businesses are allowed to participate and oppose new competition. This process can take several years and cost hundreds of thousands of dollars. Frequently, the process results in new services’ being forbidden from operating at all.

“Virginia’s CON program is nothing more than the government’s permission slip to compete, amounting to a certificate of monopoly for favored established businesses,” said IJ attorney Robert McNamara. “Patients and doctors—not the government—are in the best position to decide what medical services and equipment are needed in Virginia.”

IJ client Mark Baumel is a physician and entrepreneur who is trying to bring an innovative colon-cancer screening and treatment service to Virginia. Every year, 50,000 Americans—and about 1300 Virginians—die from colon cancer. While approximately 90 percent of colorectal-cancer deaths are preventable if caught early, only 50 percent of the at-risk population gets screened, in part because the process can be unsettling and invasive.

Dr. Baumel hopes to fix this problem with a system, Integrated Virtual Colonoscopy, which makes colon-cancer screening and treatment far easier. Integrated Virtual Colonoscopy uses modern imaging technology (called a CT scanner) to take a noninvasive picture of the patient’s lower abdomen, while a team of radiologists and gastroenterologists work together to provide same-day diagnosis and treatment. By reducing the discomfort, risk and inconvenience of colon-cancer screening, the new method has real promise to save lives.

Dr. Baumel has had a great deal of success offering IVC at his flagship office in Delaware and has agreements to expand into New Jersey. But he cannot operate in Virginia because the state’s CON program will not allow him and his partners to open a new colon health center that would offer IVC or even permit them to buy the CT scanners necessary to do virtual colonoscopies.

Dr. Mark Monteferrante, the head of Progressive Radiology, has firsthand experience with Virginia’s CON process. In 2003, Dr. Monteferrante and his partners attempted to simply add a second MRI machine to their busy office. That process took fully five years and cost roughly $175,000 in filing fees, consultant fees and attorney expenses.

Now Progressive Radiology would like to build a top-notch medical facility in Virginia. They are unwilling, however to spend another five years fighting over whether they will be given permission to buy an MRI machine, particularly when there is no way of knowing in advance whether that permission will be granted.

“Virginia has no problem with our clients providing their services. It just minds them working for themselves,” said IJ attorney Darpana Sheth. “When private citizens want to invest in innovative and effective healthcare services, the last thing the government should be doing is stopping them.”

A victory in this case could have nationwide implications. In addition to Virginia, 35 states and DC currently have CON programs. The Federal Trade Commission and the Department of Justice have concluded that there is no evidence that these CON programs have any public benefit, and found that they instead create anticompetitive protections for industry insiders.

“While 36 states impose CON requirements, Virginia is one of the worst offenders, requiring a certificate of need for things as simple as opening a private MRI clinic,” explained IJ Attorney Larry Salzman. “As even the federal government recognizes, laws like these are outdated relics, and it is past time for them to be taken off the books.”

“The nation may be divided over the federal government’s role in healthcare, but we should all be able to agree that state governments should not be harming patients by limiting their options just to funnel millions of dollars to politically connected businesses,” concluded IJ President and General Counsel Chip Mellor.

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