A Common-sense Proposal to Reduce Health Care Costs

By State Representative Phyllis Mundy

120^th Legislative District

Health care inflation is out of control.  Every double-digit rate increase in health insurance premiums causes more Pennsylvanians to lose access to health care. We in Pennsylvania are struggling along with every other state to address the issue of affordable health insurance for all our citizens.  But our efforts are doomed to fail unless we begin to address the underlying issue – out of control health care costs. There will never be enough money to insure all Pennsylvanians until we bring health care inflation under control.

One significant health care cost driver is unnecessary duplication of expensive medical technology and services. My HB 305 seeks to rein in the “technological arms race” in Pennsylvania. This bill would lay out a process whereby any health care facility or provider must apply to the Department of Health for a Certificate of Need (CON) in order to initiate or expand expensive services.

The Department would create a Certificate of Need Review Board consisting of technical experts in all aspects of the health care field along with consumers. A local review committee would be established to provide community input. Funding would come from the Patient Safety Authority’s appropriation. The Department would establish appropriate standards for review of CON applications, including quality and quantity of service and an exceptions process. The Pennsylvania Health Care Cost Containment Council would collect data and information and provide analysis to the Department.

Pennsylvania’s former CON process was allowed to expire in 1996. Since then there has been no statutory requirement for health care facilities to justify the purchase of expensive technology or specialized services, often available in a facility down the street. As a result there has been a dramatic proliferation of highly specialized clinical services, ambulatory surgical centers and diagnostic imaging equipment. This unnecessary duplication of facilities, equipment and services is a significant driver of high health care costs.

According to a November 2003 study in Health Affairs magazine the number of freestanding (non-hospital) MRI units in Pennsylvania increased 47% from 1999 to 2001.  The same study found that more availability of freestanding MRI units is associated with a higher number of outpatient MRI’s per person and more total spending.  Consider the fact that during the same period (1999 to 2001), the number of MRI scans increased from 9.3 million to 13.5 million. This 45% increase in utilization is estimated to have cost 3.4 billion dollars according to the Blue Cross Blue Shield Association.

A study performed by the Legislative Budget and Finance Committee (LBFC) last year reported that since the sunset of CON in 1996, 21 health care facilities established diagnostic cardiac catheterization programs, 31 health care facilities established new cardiac catheterization programs and 23 health care facilities established open heart surgery programs.  I believe this proliferation has had an adverse impact on both the quality and cost of health care through decreasing volumes of procedures and treatments performed at each facility and increased medical equipment costs that are ultimately borne by health care consumers.

House Bill 305 would reenact the Certificate of Need program in Pennsylvania in an effort to not only control health care costs but also improve quality of care. The LB&FC report found that procedure proficiency volumes are recognized indicators of health care quality, especially with regard to specialized clinical services such as cardiac catheterization, open heart surgery, and organ transplants.  In other words the more procedures you do, the better you are at it. If, in your community, 300 people need open heart surgery and you have 3 heart hospitals each performing 100 of them, it stands to reason that you have higher cost and lower quality than if one of these hospitals did all 300 procedures.  Wouldn’t it be better if the other two hospitals performed some other specialized procedures needed in the community?

Another important aspect of HB 305 is a prohibition against physician self-referral.  Allowing physicians to refer patients for services in which a physician has a financial interest creates an unhealthy incentive for over-utilization.  A survey from National Imaging Associates found that more than 20% of imaging studies are physician self-referrals.  Self-referring physicians order two to eight times as many scans as other doctors. 

A second proposal, which Governor Rendell plans to offer via Executive Order, establishes a regional review process similar to CON.  The governor’s plan calls for the appointment of a bi-partisan commission of health care experts, business representatives, insurers, and consumers.  Its tasks include: developing criteria for identifying regional health care needs, determining annual total  regional and statewide capital spending limits, making three-year regional need projections, and recommending the most appropriate enforcement mechanism, as well as licensure and payment restrictions. 

Opponents of CON will tell you that the duplication of these health care services is about “choice” and “competition”. I think it’s about profit. I think we need to recognize that competition is not always the solution, sometimes it’s the problem.  And in this case it’s driving people who need health insurance out of the marketplace. Health care inflation at 8 to 15 percent is simply unsustainable. We know what we need to do. It’s past time to sort through the legitimate special interests of doctors and hospitals and do what’s right for the people of Pennsylvania.