The second enactment clause of House Bill (HB) 1302 of the 1996 Session of the General Assembly directed the Joint Commission on Health Care, with staff support from the Health Systems Agencies and the Virginia Department of Health, to study the appropriateness of Virginia's Certificate of Public Need (COPN) program with added emphasis on whether or not outpatient or ambulatory surgical centers should remain subject to this law.

The Virginia COPN program, which is authorized under Title 32.1 of the Code of Virginia, was established in 1973 with the objectives of: (i) promoting comprehensive health planning to meet the needs of the public; (ii) promoting the highest quality of care at the lowest possible cost; (iii) avoiding unnecessary duplication of medical care facilities; and (iv) providing an orderly procedure for resolving questions concerning the need to construct or modify medical care facilities.

Based on our research and analysis, we concluded the following:

• There is little evidence of significant COPN impact on aggregate health expenditures, but there is evidence of savings for specific services covered by COPN.

• There is some evidence that COPN has contained resource supply, especially with high technology services.

• Growth in managed care and capitation payments reduces the incentives of health care providers to develop unneeded capacity and provide unnecessary services.

• There has been no relationship established between the level of managed care penetration nationally and the relative stringency of COPN.

• COPN has played a role in promoting better care outcomes by stressing the necessity for sufficient volume, especially high technology services.

• COPN has played a role in ensuring the delivery of health care services to the indigent and the uninsured by Virginia's regulated health care providers.

• The ability of Virginia's hospitals to cover the costs of care to the indigent and the uninsured is impacted by several factors, including: (i) greater competition in the marketplace; (ii) the development of new facilities which attract paying patients and which provide minimal care to the indigent and uninsured; and (iii) the evolution of managed care financing mechanisms. These trends could be hastened further by COPN repeal.

• Community-based health planning can and does serve a vital role in the Commonwealth, irrespective of the COPN program.

• The COPN program has not restricted the growth of outpatient surgery in Virginia.

• The COPN regulatory process favors hospital sponsored outpatient surgical hospital projects over outpatient surgical hospital projects of non-hospital sponsored investors.

A number of policy options were offered for consideration by the Joint Commission regarding the issues addressed in this report. These policy options are discussed on page 31.

Our review process on this topic included an initial staff briefing which was followed by a public comment period during which time interested parties forwarded written comments to us on the report. In many cases, the public comments provided additional insight into the various topics covered in this study. A summary of these public comments is provided in Appendix C.

Following a thorough review and discussion of this study, the Joint Commission introduced legislation (House Bi112477) which was approved by the 1997 Session of the General Assembly and can be found in Appendix D.

The legislation directs the Commissioner of Health to report annually to the Governor and the General Assembly on the status of the COPN program. The report must include: (i) a summary of actions taken; (ii) a five-year schedule for analysis of the appropriateness of all COPN project categories; (iii) an analysis of health care market reform and the extent to which such reform obviates the need for COPN; (iv) an analysis of the accessibility by the indigent to care provided by regulated medical care facilities; and (v) an analysis of the relevance of COPN to the quality of care in regulated medical care facilities.