Full Text of HR1497 94th General Assembly
HR1497 94TH GENERAL ASSEMBLY
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| HOUSE RESOLUTION
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| WHEREAS, Hospital construction is booming, according to | 3 |
| the USA Today news report (January 3, 2006) that the United | 4 |
| States is "in the middle of the biggest hospital-construction | 5 |
| boom" in more than 50 years, a trend that likely will increase | 6 |
| use of "high-tech medicine and add fuel to rising health care | 7 |
| costs"; the report indicated that the hospital industry has | 8 |
| spent almost $100 billion in inflation-adjusted dollars in the | 9 |
| past 5 years on new facilities, a 47% increase from the | 10 |
| previous 5 years, with spending likely to reach a record $23.7 | 11 |
| billion in 2005, according to the Census Bureau; and
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| WHEREAS, State and federal authorities have historically | 13 |
| expressed alarm about spiraling health care costs and | 14 |
| implemented various strategies to contain those costs, | 15 |
| including "Certificate of Need" programs aimed at controlling | 16 |
| excessive capital expenditures by health care corporations | 17 |
| that contribute to higher health facility operating costs; and | 18 |
| WHEREAS, Concerns about health care inflation caused New | 19 |
| York to enact the first "Certificate of Need" law in 1966 in | 20 |
| response to health insurers' and business leaders' concerns | 21 |
| about an excessive number of hospital beds contributing to | 22 |
| increasing costs; and | 23 |
| WHEREAS, Rising health care costs also prompted the United | 24 |
| States Congress to enact the Comprehensive Health Planning Act | 25 |
| in 1966, which required the establishment of local and state | 26 |
| health planning agencies; states that already had planning | 27 |
| agencies were required to expand the scope and authority of | 28 |
| these agencies; and | 29 |
| WHEREAS, Federal authorities began to recognize that the | 30 |
| major infusion of federal funds into the existing health care | 31 |
| system and payment methodologies of the Medicaid and Medicare |
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| programs contributed to inflationary increases in the cost of | 2 |
| health care; the system provided little incentive for cost | 3 |
| reduction; state and federal policy makers believed then that | 4 |
| excess facility supply led to increased costs of business, and | 5 |
| that those increased costs would be passed on to patients; | 6 |
| health planning and strict "Certificate of Need" laws were | 7 |
| supposed to constrain supply and therefore control prices; and | 8 |
| WHEREAS, Policy makers also believed that the tremendous | 9 |
| growth in federal health care spending was a major factor that | 10 |
| contributed to the poor distribution and utilization of health | 11 |
| care facilities; early health planning and "Certificate of | 12 |
| Need" laws were supposed to control the geographic distribution | 13 |
| of health care and ensure more efficient and full utilization | 14 |
| of health care facilities and equipment; and | 15 |
| WHEREAS, These concerns resulted in the 1972 amendments to | 16 |
| the federal Social Security Act that required all states to | 17 |
| review health care capital expenditures in excess of $100,000; | 18 |
| non-compliance would result in the denial of Medicare and | 19 |
| Medicaid reimbursements for capital expenditures; this federal | 20 |
| law effectively became the national "Certificate of Need" law; | 21 |
| and | 22 |
| WHEREAS, The U.S. Congress passed the National Health | 23 |
| Planning and Resources Development Act in 1974, which directed | 24 |
| each state to examine proposed health care facilities and "make | 25 |
| findings as to the need for such services"; federal financial | 26 |
| participation in the cost of Medicaid and Medicare would be | 27 |
| withheld if a state did not comply; and | 28 |
| WHEREAS, Every state and the District of Columbia enacted | 29 |
| "Certificate of Need" laws and regulations to comply with | 30 |
| federal law; and | 31 |
| WHEREAS, The federal government in 1986 reversed course and |
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| repealed the federal mandatory health planning law; since that | 2 |
| time, 14 states repealed their laws; 36 states and the District | 3 |
| of Columbia still have "Certificate of Need" laws; and | 4 |
| WHEREAS, Proponents argue that "Certificate of Need" laws | 5 |
| regulate surplus capacity in health care facilities so that | 6 |
| there is less duplication of services and lower operating | 7 |
| costs; the higher cost of excess capacity is passed on to | 8 |
| insurance companies and patients in the form of higher prices; | 9 |
| by regulating the supply, surplus will be avoided; and | 10 |
| WHEREAS, Opponents argue that the law has not controlled | 11 |
| costs, improved quality, or increased access to health care; it | 12 |
| may block access to health care choices and to modernized | 13 |
| health care facilities; opponents also claim that "Certificate | 14 |
| of Need" laws constitute over-regulation and are harmful to the | 15 |
| economy, and that health care should be subject to the same | 16 |
| market forces that determine the quality, availability, and | 17 |
| price of other goods and services; and | 18 |
| WHEREAS, The Federal Trade Commission (FTC) and the | 19 |
| Department of Justice (July 2004) reported: (a) that | 20 |
| "Certificate of Need" programs pose serious competitive | 21 |
| concerns that generally outweigh their benefits; (b) that there | 22 |
| is considerable evidence that they can actually drive up prices | 23 |
| by fostering anticompetitive barriers to entry; (c) that this | 24 |
| process has the effect of shielding incumbent health care | 25 |
| providers from new entrants, which can increase health care | 26 |
| costs, as supply is depressed below competitive levels; (d) | 27 |
| that these programs can retard entry of firms that could | 28 |
| provide higher quality services; and (e) that these programs | 29 |
| have been ineffective in controlling costs because they do not | 30 |
| put a stop to "supposedly unnecessary expenditures" and merely | 31 |
| "redirect any such expenditures into other areas"; and | 32 |
| WHEREAS, The American Health Planning Association refuted |
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| the FTC criticism of "Certificate of Need" programs, claiming | 2 |
| that there is little analytical or factual basis for the | 3 |
| criticism or for the recommendation to eliminate them; little | 4 |
| evidence is presented to demonstrate that market forces have | 5 |
| had, or are likely to have, the positive effects in the health | 6 |
| care system; the argument that planning and "Certificate of | 7 |
| Need" regulation result in higher costs and prices, inferior | 8 |
| quality, reduced access, less innovation, and lower operating | 9 |
| efficiency, though repeatedly made, is not supported by | 10 |
| demonstrated facts; "Certificate of Need" regulation, with | 11 |
| related community-based planning, is one of the few tools that | 12 |
| policymakers, health system officials, and ordinary citizens | 13 |
| have available for use in trying to compensate for known | 14 |
| weaknesses and deficiencies in the existing health care system; | 15 |
| these decision-making processes provide a unique forum where | 16 |
| all interested parties, and ordinary citizens, can express | 17 |
| their views and state their needs; this oversight identifies | 18 |
| critical quality, cost, and access concerns that are important | 19 |
| to consumers; and | 20 |
| WHEREAS, The Illinois Health Facilities Planning Act (20 | 21 |
| ILCS 3960/) became effective in 1974; it created a 13-member | 22 |
| Health Facilities Planning Board to review the necessity of | 23 |
| capital expenditures for the establishment or modification of | 24 |
| health facilities and the procurement of medical equipment; | 25 |
| entities subject to the Illinois Health Facilities Planning Act | 26 |
| include licensed and state-operated hospitals, long-term care | 27 |
| facilities, dialysis centers, ambulatory surgery centers, and | 28 |
| alternative health care delivery models; facilities operated | 29 |
| by the federal government are exempt; under current law, | 30 |
| transactions requiring a permit include any construction or | 31 |
| modification by or on behalf of a health care facility | 32 |
| exceeding the expenditure minimum ($7,167,063) for projects | 33 |
| that result in a substantial increase in a facility's bed | 34 |
| capacity, for projects that result in a substantial change in | 35 |
| the scope or functional operation of a facility, and for |
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| projects that establish or discontinue a facility or category | 2 |
| of service; in addition, the acquisition of major medical | 3 |
| equipment (valued at more than $6,573,026) or health and | 4 |
| fitness centers (valued at more than $3,267,766) requires a | 5 |
| permit or exemption; and | 6 |
| WHEREAS, Proposals to repeal Illinois' law have not been | 7 |
| enacted, but there has been a substantial reorganization of the | 8 |
| Board; proponents have successfully argued that, although the | 9 |
| Board has not historically denied many projects, the review | 10 |
| process requires applicants to more carefully develop and scale | 11 |
| their projects to established criteria and standards of need; | 12 |
| many existing hospitals and the communities they serve have | 13 |
| generally supported the "Certificate of Need" law, because | 14 |
| elimination could jeopardize their economic vitality by a | 15 |
| radical proliferation or expansion of unnecessary facilities; | 16 |
| and
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| WHEREAS, The 93rd General Assembly restructured the Board; | 18 |
| Senate Bill 1332 (P.A. 93-0041) was enacted after extensive | 19 |
| debate about the history and performance of the Board and in | 20 |
| response to proposals for its complete elimination; the new law | 21 |
| replaced the 13-member board with an entirely new 9-member | 22 |
| board appointed by the Governor with no requirements that they | 23 |
| represent particular interests; the law also changed various | 24 |
| operating policies and procedures of the Board and established | 25 |
| a "Sunset" (repeal date) of July 1, 2008; and
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| WHEREAS, A major scandal involving conflicts of interest | 27 |
| and criminal indictments of a Board member for "influence | 28 |
| peddling, kickbacks, and other corrupt actions" by parties | 29 |
| involved in applications subject to review prompted the | 30 |
| Governor and General Assembly to reduce the size and makeup of | 31 |
| the Board and to impose more strict membership requirements; to | 32 |
| prevent conflicts-of-interest, the law now provides that no | 33 |
| person can be appointed, or continue to serve as a member of |
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| the Board, who is, or whose spouse, parent, or child is, a | 2 |
| member of the Board of Directors of, has a financial interest | 3 |
| in, or has a business relationship with a health care facility; | 4 |
| provisions were also added restricting ex parte communications | 5 |
| by board members and staff to protect against influence | 6 |
| peddling; the 93rd General Assembly enacted House Bill 7307 | 7 |
| (P.A. 93-889) to restructure the Health Facilities Planning | 8 |
| Board again; the membership was reduced to 5 members and all | 9 |
| members were completely replaced; the status of the entire | 10 |
| "certificate-of-need" law was also going to be subject to | 11 |
| reconsideration under a new "Sunset" date of July 1, 2006; this | 12 |
| date was set to allow more time for evaluation of the Board's | 13 |
| operations, to provide an opportunity for the Board to | 14 |
| implement major rule changes intended to streamline and clarify | 15 |
| the existing review process, and to develop and report | 16 |
| meaningful data regarding its performance and effectiveness; | 17 |
| and
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| WHEREAS, The 94th General Assembly subsequently enacted | 19 |
| Senate Bill 2436 (P.A. 94-983) that extended the "Sunset" date | 20 |
| once again to April 1, 2007, so that the status of the Board | 21 |
| and the "Certificate of Need" program can be subject to | 22 |
| further, and more intensive, evaluation, given the | 23 |
| acceleration of health facility capital expenditures, the | 24 |
| national trends of such health care regulation, continuing | 25 |
| concerns about increasing health care costs, the need for more | 26 |
| effective cost containment, and the controversial history of | 27 |
| Illinois' current system; therefore, be it
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| RESOLVED, BY THE HOUSE OF REPRESENTATIVES OF THE | 29 |
| NINETY-FOURTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, that | 30 |
| the Illinois Commission on Government Forecasting and | 31 |
| Accountability shall conduct a comprehensive evaluation of the | 32 |
| Illinois Health Facilities Planning Act, including a review of | 33 |
| the performance of the Illinois Health Facilities Planning | 34 |
| Board, to determine if it is meeting the goals and objectives |
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| that were originally intended in the enactment of the law and | 2 |
| the establishment of the Board, and as the law has been amended | 3 |
| and the Board policies and procedures revised since that time, | 4 |
| with special consideration for its affect on controlling | 5 |
| unnecessary and excessive capital expenditures that may be | 6 |
| contributing to health care inflation; the Commission shall | 7 |
| determine the criteria, standards, and procedures for this | 8 |
| independent evaluation; the Commission must conduct an | 9 |
| objective analysis of the impact of the "Certificate of Need" | 10 |
| program since its inception 32 years ago; and be it further
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| RESOLVED, That the Commission issue a report to the General | 12 |
| Assembly of its findings by February 15, 2007, together with | 13 |
| any recommendations for change to the Illinois Health | 14 |
| Facilities Planning Act and the structure, function, policies, | 15 |
| and procedures of the Illinois Health Facilities Planning | 16 |
| Board.
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