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Fourth Circuit Upholds Constitutionality of CON Law

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A recent decision of the Fourth Circuit upholds the constitutionality of a Certificate of Need (“CON”) law that the court had hinted might be in peril in 2013.  On return to the Fourth Circuit after further trial court proceedings, the court rejected the claim that the Virginia CON laws discriminated against interstate commerce. Colon Health Centers of Am. v. Hazel, No 14-2283 (4th Cir. January 21, 2016).  The court therefore held that the Virginia CON laws did not violate the U.S. constitution’s commerce clause.  Among other things, the court found:

  1. The "incumbency bias" in favor of existing providers did not “facially discriminate” against out-of-state providers;
  2. The expert testimony as to actual treatment of out-of-state providers (as to length of proceeding, outcomes, and other matters) was sufficient to show non-discrimination;
  3. Even though Virginia produced no expert testimony to rebut the expert testimony of the plaintiff that CON laws increase costs, that testimony was not enough to overcome the legislative finding that CON laws do constrain costs.

The decision has clear implications for the West Virginia and Maryland programs (both governed by Fourth Circuit law) and even Kentucky (governed by Sixth Circuit).  Of particular note, given some proposals for statutory amendment in West Virginia: the court rejected claims that Virginia’s CON exemption for renovation and replacement was per se discriminatory.

The takeaway is that any challenge to CON laws in neighboring states would face a very uphill battle, given key similarities in the programs.

For questions about the decision or other CON issues, contact a member of the Steptoe & Johnson Health Care Team

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