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Colon Health Centers of America, LLC v. Hazel

United States District Court, E.D. Virginia, Alexandria Division

October 23, 2014

COLON HEALTH CENTERS OF AMERICA, LLC, et al., Plaintiffs,
v.
BILL HAZEL, in his official capacity as Secretary of Health and Human resources, et al., Defendants.

MEMORANDUM OPINION

CLAUDE M. HILTON, District Judge.

THIS MATTER comes before the Court on Plaintiffs' and State Defendants' cross-motions for summary judgment.

Since 1992, Virginia has required purveyors of new medical projects to obtain a Certificate of Public Need (COPN) before conducting business in the state. The application process delays entry into Virginia's medical services market and may cause would-be providers to incur substantial costs. Plaintiffs are out-of-state companies that seek to conduct business in Virginia. They allege Virginia's COPN requirement and application process unconstitutionally discriminate against interstate commerce. Their claim fails because Virginia's COPN laws do not have the purpose or effect of discriminating against out-of-state businesses, and because they do not unduly burden interstate commerce.

I.

A.

Plaintiff Colon Health Centers of America ("Colon Health") uses computed tomographic ("CT") scanning technology to provide a service called "Integrated Virtual Colonoscopy." Integrated Virtual Colonoscopy is a "one-stop shop" that can screen, diagnose, and treat colorectal cancer during the same appointment. Colon Health believes there is an unmet need for Integrated Virtual Colonoscopy in Virginia; it seeks to provide this service via partnerships with Virginia-based physicians.

Plaintiff Progressive Radiology seeks to operate a specialized magnetic resonance imaging ("MRI") office in Fairfax County, Virginia. The office's radiologists would use an MRI scanner to diagnose injuries to the joints, bones, brain, and spine. Progressive Radiology estimates the Fairfax County office would serve approximately 400 patients per month.

Both plaintiffs are out-of-state providers whose projects are subject to Virginia's COPN requirement. Virginia does not dispute that Plaintiffs' projects would be entirely financed by private funds, nor does it contest whether either plaintiff is qualified to provide the services it seeks to render. Virginia makes no claim that CT scanning and MRI services are medically controversial.

B.

Virginia is one of 36 states to operate a COPN program. Established in 1973, its program has existed in its current version since a three-year period of deregulation ended in 1992. Virginia requires a COPN for various medical projects, including the "[e]stablishment of a medical care facility" and the "[i]ntroduction into an existing medical care facility of any new... computed tomographic (CT) scanning, ... [or] magnetic resonance imaging (MRI) [services]... which the facility has never provided or has not provided in the previous 12 months." Va. Code Ann. § 32.1-102.1(1), (5). While existing medical care facilities must obtain a COPN to operate additional CT and MRI scanners, a COPN is not required for replacement equipment. § 32.1-102.1(7).

Virginia contains five health planning regions comprised of 22 health planning districts. COPN applications are reviewed in batches, meaning the review process normally does not begin as soon as an application is submitted. Instead, applications gather until the date of a batch review cycle when review of the entire batch begins. § 32.1-102.6(D).

Applications are ultimately evaluated by the State Health Commissioner ("Commissioner"). Prior to the Commissioner's review, however, an informal fact finding conference (IFFC) may be held in order to further develop the factual record. The Commissioner evaluates eight criteria to determine whether a public need for a project has been demonstrated and a COPN should issue:

1. The extent to which the proposed service or facility will provide or increase access to needed services for residents of the area to be served, and the effects that the proposed service or facility will have on access to needed services in areas having distinct and unique geographic, socioeconomic, cultural, transportation, and other barriers to access to care;
2. The extent to which the project will meet the needs of the residents of the area to be served, as demonstrated by the following: (i) the level of community support for the project demonstrated by citizens, businesses, and governmental leaders representing the area to be served; (ii) the availability of reasonable alternatives to the proposed service or facility that would meet the needs of the population in a less costly, more efficient, or more effective manner; (iii) any recommendation or report of the regional health planning agency regarding an application for a certificate that is required to be submitted to the Commissioner pursuant to subsection B of § 32.1-102.6; (iv) any costs and benefits of the project; (v) the financial accessibility of the project to the residents of the area to be served, including indigent residents; and (vi) at the discretion of the Commissioner, any other factors as may be relevant to the determination of public need for a project;
3. The extent to which the application is consistent with the State Medical Facilities Plan;
4. The extent to which the proposed service or facility fosters institutional competition that benefits the area to be served while improving access to essential health care ...

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