Trial Court Gives First Round of Healthcare Battle to State Officials

J. Justin Wilson
J. Justin Wilson · September 17, 2012

Arlington, Va.—On Friday, September 14, a federal trial judge in the Eastern District of Virginia granted the state government’s motion to dismiss a major constitutional challenge to a Virginia law that prevents doctors from offering safe and accepted healthcare options to the state’s residents.

The lawsuit, brought by the Institute for Justice (IJ) on behalf of a coalition of medical professionals, challenges Virginia’s certificate-of-need (or CON) program. CON requirements like Virginia’s actually make 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 Virginia’s program, licensed medical professionals who want to invest their own money 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, like with the plaintiffs in this challenge, 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 Senior Attorney Robert McNamara. “When private citizens want to invest in innovative and effective healthcare services, the last thing the government should be doing is stopping them.”

IJ clients participating in the lawsuit include Dr. Mark Baumel, a physician and entrepreneur who is trying to bring an innovative colon-cancer screening and treatment service to Virginia, and Dr. Mark Monteferrante, the head of Progressive Radiology, a team of Virginia-licensed radiologists who are barred by the law from opening an office to treat their patients in the state.

The lawsuit argues that Virginia’s CON program violates these doctors’ right to earn an honest living, as well as poses an unconstitutional barrier to the free flow of interstate commerce. The court disagreed with both arguments, saying that the state’s program was permissible as an effort “to avoid private parties making socially inefficient investments in health-care resources they might make if left unregulated.”

“There are several problems with that argument,” explained IJ Attorney Darpana Sheth. “First, doctors and patients should be determining what medical services are needed and what healthcare resources should be invested in a particular community, not unelected bureaucrats. Moreover, there is a mountain of evidence, such as a joint study by the Justice Department and Federal Trade Commission, showing that CON programs do not do anything to reduce healthcare costs or improve access to healthcare. In fact, Virginia’s CON program has resulted in patients being denied access to the cost-effective and innovative services offered by our clients. ”

“The evidence shows that CON programs like Virginia’s have predictable results: fewer choices and higher prices for patients, and less competition for established businesses,” continued IJ Attorney Larry Salzman. “Most states don’t have a CON program for inexpensive medical equipment, and more than a dozen states don’t have any medical CON requirements at all. There is no evidence Virginia’s program accomplishes anything other than serving as a huge barrier to entry.”

“The court’s ruling is wrong because these facts matter,” concluded McNamara. “Under our Constitution, courts are required to engage with actual facts and look at real evidence when citizens’ constitutional rights are at stake. We intend to appeal this ruling, and we look forward to presenting this overwhelming evidence to the courts.”

For more on the ongoing lawsuit, visit Founded in 1991, the Virginia-based Institute for Justice is the nation’s leading legal advocate for economic liberty.

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