Checking Up On Health: May 3, 2016

Health Care News and Views
Compiled by Benita M. Dodd



Late last year, I visited a friend who had fractured her leg and was wheelchair-bound, recovering after surgery in a rehabilitation center in Atlanta. By the time I’d circled the parking lot twice and resorted to parking on the street, I was already unimpressed. The reception desk was unstaffed, the sign-in sheet on a clipboard. I got into a small, slow elevator in the four-story building and walked a cramped hallway to her drab room.  

I’m sure the staff was nice and professional, but I wondered how the facility’s four stories would be evacuated in any emergency. It occurred to me that opportunities for attractive post-operative recovery and long-term rehabilitation facilities should abound in metro Atlanta. After all, the Atlanta Regional Commission predicts that by 2030, one in five residents will be over the age of 60.  

I was reminded of that visit when I received an e-mail this week from a law firm announcing it is challenging as unconstitutional Indiana’s 2015 moratorium on new “transitional care” facilities. The Indiana law  prohibits – until 2018 – licenses for new skilled nursing facilities and transitional care properties. Indiana-based Mainstreet Property Group says pending projects were affected, costing the company more than $9 million. Here’s a video on the service Mainstreet provides for its “patient guests.”

Attorney Jim Bopp, representing Mainstreet, made it clear the company believes this is an anti-competitive move:

Other industries are not able to use moratoriums to protect themselves from competition, but this is exactly what [this law] does for existing nursing homes. It protects existing providers while stifling innovation and competition. The Moratorium made a bad idea worse by applying retroactively, reaching back to cancel projects well under development on a basis that has nothing to do with need or quality of care.

Mainstreet's dozens of properties house "patient guests."

A view of one of Mainstreet’s dozens of transitional care properties, where it accommodates “patient guests.”

In December, I met Mainstreet’s CEO and founder, Zeke Turner, at a presentation in Nashville where he shared his vision and the company’s hurdles. The transitional facilities are beautiful, modern, just the kind of uplifting surroundings that healing patients need. They’re more like modern-day hotels than the depressing Atlanta rehab center I visited and where, if I could choose, I would not like to be a patient.

Mainstreet bills itself as “the nation’s largest developer of transitional care properties, where patients receive high quality health care services following a hospital stay. The average length of stay is less than 20 days.”

Of its 29 properties, the company has 24 in Indiana; 30 more projects are in development across the country. It’s not in Georgia yet. Who can blame it? Go for the low-hanging fruit first. Georgia’s health industry doesn’t take well to interlopers or competition; just ask Cancer Treatment Centers of America.

In 2016, the Georgia House once again failed to repeal the 1979 Certificate of Need law that requires applicants to show “need” for new health care facilities, expansions or services. The CON process is supposed to “to measure and define need, (2) to control costs, and (3) to guarantee access to health care services.”

You know things are bad when even the federal government – which eliminated its CON laws – declares that, “the evidence to date does not suggest that [such] laws have generally succeeded in controlling costs or improving quality.”  In fact, the federal government noted specifically:

  • CON laws create barriers to entry and expansion, limit consumer choice, and stifle innovation.
  • Incumbent firms seeking to thwart or delay entry by new competitors may use CON laws to achieve that end.
  • As illustrated by the FTC’s recent experience in the Phoebe Putney case (in Georgia), CON laws can deny consumers the benefit of an effective remedy following the consummation of an anticompetitive merger.

The Georgia Public Policy Foundation has long opposed the CON law. Our sister think tank, the Goldwater Institute of Arizona, has a litigation arm and is representing two Georgia surgeons who have filed suit over Georgia’s CON law after the state denied them permission to expand their practice in Cartersville. Hugo Ribot and Malcolm Barfield sought to add an operating room at their Georgia Advanced Surgery Center for Women and allow other surgeons to use their facility. Read more about the lawsuit here.

Incidentally, I looked at the latest CON list from the Department of Community Health, and it’s replete with challenges to applications. (Also, there are lots of applications for substance-abuse treatment beds — a sign of the growing opioid addiction problem?) It’s clear that for Georgia’s patients to be able to choose state-of-the art facilities such as Mainstreet’s, the state must remove the CON barriers that hinder competition and discourage investors.   

For more on CON laws, read:

State Regulations: Stifling Competition In Home Nursing, by Elder Olson (1995)

What Georgia Should Do About Certificate of Need, by Dr. Brenda Fitzgerald (2007)

Mercatus Study Finds Dire Consequences to Georgia CON Program (2015)

Mainstreet has developed 24 transitional care properties in Indiana and a total of 29 properties across the country, with an additional 30 projects currently in development across the country.

Of its 29 transitional care properties, Mainstreet has developed 24 in Indiana, with 30 more projects in development across the country.