Michigan Senate moves to deregulate health care

A Senate committee Thursday approved a stripped-down legislative package aimed at deregulating segments of health care in Michigan.

Among the approved measures are bills to eliminate the need for regulatory approval by the state Certificate of Need Commission for new psychiatric beds, for hospital capital renovation or construction spending and for hospital helicopter ambulance services.

But the package passed Thursday left out key measures introduced in January that would lessen state oversight over dozens of rural hospitals and strip regulation of some outpatient heart procedures.

State Sen. Curtis VanderWall, R-Ludington, chairman of the Committee on Health Policy and Human Services, told Bridge in January that the aim of the deregulation bills was to cut red tape, trim costs and make it easier for patients to receive care in Michigan.

“What we are trying to do is give better access to care for the citizens of Michigan,” VanderWall said.

At Thursday’s committee session, VanderWall said he remains committed to the goal of eventually removing certificate of need (CON) oversight for critical access hospitals and outpatient heart catheterization.

“I have heard very clearly all of the concerns raised on these two bills in particular. And while I feel strongly about these two bills, I am committed to working on them and working on the concerns as the rest of the bills move forward.”

The bills, passed largely along party lines in the Republican-led chamber, are backed by Americans for Prosperity, the Koch brothers-affiliated free-market advocacy group that VanderWall insists had no role in crafting the bills. 

Elements of the original package were opposed by the Michigan Health & Hospital Association, Blue Cross Blue Shield of Michigan and health care executives who argued they could raise, not lower, medical costs and threaten patient safety.

VanderWall also was lead sponsor of a bill — pulled from the Thursday vote— to exempt critical access hospitals of 25 beds or fewer and more than 35 miles from another hospital from CON regulation.

That drew pushback from some rural hospital officials, who worry that measure would threaten their bottom line.

Officials at Dickinson County Healthcare System, in the state’s Upper Peninsula, said that bill would allow smaller rural hospitals in the region to install redundant services that could threaten Dickinson’s survival.  

Facing $61 million in debt, Dickinson officials weighed bankruptcy in 2018 after two plans to sell the struggling Iron Mountain hospital fell through. After cost-cutting measures, hospital officials hope for firmer financial footing with approval of a $25.6 million federal loan this year.

But Chuck Nelson, the hospital’s president and CEO, said that bill could put the 49-bed hospital back in jeopardy.

“It literally threatens the viability of our hospital,” Nelson told Bridge.

The Michigan Health & Hospital Association also opposed exempting critical access hospitals from CON oversight.

In addition, the group opposed a bill in the original package to remove CON approval for outpatient heart catheterization, a diagnostic and treatment procedure in which a tube called a catheter is inserted into an artery or vein and threaded through blood vessels to the heart. It argued that the bill, if passed, could jeopardize patient safety.

That bill was also dropped from the package approved Thursday.

According to the National Conference of State Legislatures, Michigan is among 36 states that retain some form of CON program. That oversight was mandated nationwide in 1974 by federal law that boosted funding for state health planning regulations, as all states but Louisiana adopted some form of that regulation by 1982.

The core premise of CON regulation is that it curbs needless health care spending by forcing hospitals to justify major projects or new construction that add hospital beds. Proponents also argue that certificate of need requirements help ensure that care is distributed to disadvantaged populations or geographic areas that might not otherwise be served.

The federal mandate was repealed in 1987. Since then, according to NCSL, a dozen states have repealed their CON program as free-market advocates pressed to deregulate large chunks of health care.

In 2015, an analysis by the Ann Arbor-based Center for Health and Research Transformation, a nonprofit health care research organization, concluded that Michigan had lower per capita costs than Wisconsin and Indiana, both of which did not regulate hospital services. Michigan’s per capita hospital cost was $2,624, compared to $2,975 in Indiana and $3,107 in Wisconsin.

It concluded that Michigan’s lower costs were due in part to Michigan’s CON oversight.

Michigan does have a shortage of psychiatric care, but Heather Treib of Pine Rest Christian Mental Health Services in Kent County told Bridge in January that regulatory approval of new beds is not the chief barrier to care. Rather, she said, it’s finding staff to fill openings.

“I do think more of the issue is the challenge around staffing. Overall, psychiatric resources are hard to come by,” Treib said.

Adam Carlson of the state hospital association said Thursday the group “will continue to work with our lawmakers as CON reforms are considered throughout the legislative process.”