In shoreline cancer treatment dispute, questions about hospital competition

This is A picture of an Elektra linear accelerator, included in Middlesex Hospital's certificate of need proposal.

Office of Health Care Access

A picture of an Elekta linear accelerator from a promotional brochure, included in Middlesex Hospital's certificate of need application.

What began with a plan to replace an aging piece of medical equipment has turned into a dispute over the delivery of cancer care along Connecticut’s affluent shoreline.

And at a time when policymakers have expressed worries about preserving competition in the state’s fast-consolidating health care market, one side has suggested the case highlights questions about competition – and the way state regulation can limit it.

As officials at Middlesex Hospital tell it, they have a unique opportunity: One of their two linear accelerators, used in radiation treatment for cancer, is at the end of its useful life. Instead of putting the replacement in Middletown, where both machines are now, they proposed putting it in Westbrook, where the hospital operates a clinic. That way, they argued, many of their shoreline cancer patients could get care closer to home, rather than having to travel 30 minutes or more for weeks of daily radiation.

But officials at Yale-New Haven Hospital – which operates its own linear accelerator in Guilford, 13 miles from Middlesex’s Westbrook facility – see it differently. While they say there’s nothing wrong with replacing a 13-year-old machine, they raised a host of concerns about putting the new one on the shoreline. They argue it’s unnecessary in a region with three other linear accelerators within 20 miles; could raise health care costs while potentially hampering care quality; and would amount to moving a treatment machine from poorer Middletown to a more affluent area where a minority of the hospital’s patients live.

In a proposed decision issued last month, an official with the state Office of Health Care Access largely agreed with Yale and recommended denying a permit – known as a certificate of need, or CON – for Middlesex’s proposal. Among other things, hearing officer Kevin Hansted wrote that Middlesex hadn’t shown a clear need for the change in location or shown that the proposal would maintain the quality, accessibility or cost-effectiveness of health care delivery in the region. And, he wrote, the hospital hadn’t shown that moving one of the two machines out of Middletown wouldn’t reduce access to services by Medicaid or indigent patients.

This is a picture of Vincent Capece Jr.

Arielle Levin Becker / CTMirror.org

Vincent Capece Jr.

Middlesex Hospital officials raised several concerns with the proposed decision, some of which were detailed in oral arguments Wednesday. And they have cast their proposal – and Yale-New Haven’s objections – in the context of market competition, a hot topic among policymakers worried about consolidation in Connecticut’s health care landscape as hospitals join larger systems and doctors give up independent practice to join larger groups or hospital systems.

Vincent G. Capece, Jr., Middlesex’s president and CEO, said during a public hearing on the proposal that Yale-New Haven’s objections boil down to efforts to stifle competition and “eliminate perceived threats to its clear plans to monopolize that market.”

Of the three linear accelerators on the shoreline within 20 miles of Middlesex’s Westbrook site, one is at Yale’s Guilford facility and two are at Lawrence + Memorial Hospital’s Waterford cancer center. But Capece noted that the Yale New Haven Health System now has plans to add Lawrence + Memorial to its system, if regulators allow it. If that occurs, he said, “It effectively gives Yale a monopoly on the shoreline…and that’s a big concern for us.”

Middlesex officials have also alluded to broader concerns about whether the certificate of need process itself – the regulatory scheme that governs much of Connecticut’s health care landscape and, as OHCA puts it, aims to prevent “costly duplications of services” – is at odds with promoting market competition. In a filing with regulators, they noted that the Federal Trade Commission has warned that certificate of need laws raise competitive concerns without benefitting consumers.

“Especially in light of the rapid consolidation of the health care market in Connecticut, it [is] important that OHCA not allow the CON process to be used as a means of lessening competition,” one of the hospital’s filings in the case said.

This is a picture of Vincent P. Petrini

Arielle Levin Becker / CTMirror.org

Vin Petrini

Vin Petrini, Yale-New Haven's senior vice president for public affairs, said it’s inaccurate to attribute the hospital’s opposition to Middlesex’s proposal to business competition, and noted that OHCA affirmed many of the concerns Yale-New Haven raised.

He also questioned the idea of focusing only on service provision on the shoreline and linking the Yale-L+M deal to Middlesex’s proposal, which is being reviewed by OHCA and the state attorney general’s office.

“It doesn’t sound like the concern they’re raising is, A, supported by the facts, or B, related to this particular issue,” Petrini said of Middlesex Hospital. “We’ve got great respect for them. This is just a matter of small disagreement on this particular issue.”

Duplication of services or choice for patients?

Decisions about whether hospitals can acquire costly equipment, open certain types of facilities or add or eliminate services are governed by the certificate-of-need process. It’s rooted in the premise that too much health care capacity can lead to higher costs.

In opposing Middlesex’s plan, Yale-New Haven officials alluded to concerns about capacity, saying another linear accelerator in the region would duplicate services – patients who need radiation treatment already have the choice of Yale-New Haven’s facility in Guilford or L+M’s in Waterford – without improving patient care, and said it could weaken existing providers.

“We feel that the proposed CON would produce a sub-optimal duplication of existing cancer services that will drive up health care costs without material benefit to patients,” wrote three Yale School of Medicine professors who are part of the Yale Medical Group – Dr. Kenneth B. Roberts, medical director of radiation oncology at the Yale-New Haven Shoreline Medical Center in Guilford; Dr. Suzanne Evans, medical director of radiation oncology at L+M; and Dr. Peter M. Glazer, chief of radiation oncology at Yale-New Haven.

They and Abe Lopman, executive director of Smilow Cancer Hospital at Yale-New Haven, also wrote that the proposal could hurt the collaborative relationships among cancer specialists at Middlesex, Yale-New Haven and L+M, who they said refer patients to the most convenient and appropriate location, even if it’s in a different system.

Middlesex Hospital officials countered that their plan wouldn’t increase capacity or drive up costs because the hospital already uses two linear accelerators and is simply seeking to relocate one to a place that’s more convenient for many of its existing patients.

And Middlesex officials gave a different perspective on issues of cost and capacity, saying theirs is a lower-cost hospital and that a lack of choices can drive up costs.

“[T]he fact of the matter is that cost-effective, high-quality options are a good thing for patients in the community,” Gary C. Havican, Middlesex’s vice president for strategic planning and ambulatory operations, said in written testimony to OHCA.

Questions about shoreline demand, care quality

To be sure, the contrasting arguments about the proposal go beyond matters of competition and capacity.

This is a picture of The Office of Health Care Access' proposed final decision denying Middlesex Hospital's proposal. The office has not yet issued a final decision.

The Office of Health Care Access' proposed final decision denying Middlesex Hospital's proposal. The office has not yet issued a final decision.

The two sides have disputed what proportion of Middlesex’s current patients should be considered to live in the shoreline area, a key factor in assessing demand. Middlesex included those living in Durham, East Haddam and Haddam in the tally of patients likely to go to the Westbrook facility, suggesting 37 percent of its current linear accelerator use was for shoreline-area patients. Yale-New Haven officials argued that the actual figure is closer to 25 percent, and that including those three towns inflated the shoreline-area total.

Middlesex officials say no matter how the breakdown is done, they have many patients in the shoreline area who would benefit from a more convenient location.

Many patients and shoreline residents wrote letters supporting the proposal, including 90-year-old Charlotte Barringer of Essex, who wrote that she drove her husband to Middletown for care for about a year, “and can attest to the fact most people on radiation often have difficulty traveling a distance.” She added that she now drives friends from Essex and has had to stop along the way to give them oxygen.

But in the proposed final decision, OHCA used figures closer to Yale-New Haven’s estimate of demand, finding that more than three-quarters of treatment delivered using Middlesex’s linear accelerators was for patients from the Middletown area.

“Although the proposal may reduce travel time for some Shoreline-area patients, convenience for a minority of patients is insufficient to demonstrate a clear public need for a [linear accelerator] in a given area,” Hansted, the hearing officer, wrote.

Care quality has also been a topic of disagreement.

Yale-New Haven physicians suggested care quality could suffer if Middlesex’s cancer radiation program were split among two sites, and questioned how Middletown-area patients would fare with only one linear accelerator there. “[T]he end result of MH’s proposal will be to diminish capacity in Middletown by moving one [linear accelerator] away from 75% of its current patient visit volume,” Lopman wrote.

Middlesex officials said it was “nonsensical” to suggest the plan would hurt Middletown patients, since, by their calculation, the demand from Middletown-area patients could be met by one linear accelerator. In their response to OHCA's proposed denial, they repeated their disagreement with the quality and logistical concerns, but said they would make changes to the plan to address them.

In the proposed decision denying Middlesex’s plan, Hansted cited a variety of factors, including the potential for the proposal to compromise services in the Middletown area, and said the hospital hadn’t established a clear public need or shown it wouldn’t lead to unnecessary duplication of services in the shoreline area.

Does state regulation limit competition?

Capece believes the state’s certificate-of-need laws are not being used correctly in the case. And Middlesex officials have said in OHCA filings that their proposal should be understood in the context of concerns about diminishing competition and consolidation in health care.

Three-quarters of the state’s 28 general hospitals are now either part of larger health systems that operate multiple hospitals or in talks to join one.

Critics of the trend warn that increasing market power among hospitals can lead to higher prices for care.

But the state’s health care landscape has been shaped in part through the certificate-of-need process, which is based on a different view of the role of competition in health care.

Are the two – the certificate-of-need process and competition – at odds?

The Federal Trade Commission and U.S. Department of Justice’s Antitrust Division have said they are, arguing in a 2004 report that, “on balance, CON programs are not successful in containing health care costs, and…they pose serious anticompetitive risks that usually outweigh their purported economic benefits.”

Existing health care providers can use the CON process to keep competitors from entering the market, potentially leading to higher prices, they wrote.

The two agencies recommended that states with CON programs “reconsider whether they are best serving their citizens’ health care needs by allowing these programs to continue.”

Zachary Janowski, director of external affairs for the Yankee Institute for Public Policy, who has called for the state to eliminate the CON process, noted that the state wouldn’t stop Walgreens from opening a store across from a CVS, and questioned why it would do the equivalent with hospitals.

“The involvement of the state doesn’t have a clear public interest,” he said. “They’re choosing between two very distinct private interests.”

In the case of health care, Janowski said, the worst-case scenario of eliminating limits on capacity in services would be too many cancer treatment options in an area. In that case, he said, one or more hospitals would lose money.

“Should it really be a regulator’s prerogative to make sure that doesn’t happen?” he said.

Others see merit to the regulation.

Jill Zorn, senior policy officer at the Universal Health Care Foundation of Connecticut, said CON requirements have protected the state from having more health care services and hospitals than it needs.

“It can be really expensive to have all these services, more than we need, because all the capital expense eventually gets put into the price that is charged,” she said.

But Zorn said she’d like to see better protection for consumers when it comes to health care prices. She noted that the office that preceded OHCA used to set payment rates for hospital services.

“Preventing competition because you’re preventing overbuilding may not be that bad,” Zorn said. “On the other hand, when you have a complete monopoly, you better have a way to control their prices because we know that’s definitely a problem. And very few states are doing that.”

Even so, Zorn said she’s not certain how well competition works to hold down costs in health care.

And even some advocates of more competition acknowledge that there are factors particular to health care that limit it, including the fact that consumers are generally insulated from prices by their insurance coverage, have limited access to information on health care price and quality, and most people view health care differently than other consumer products.

Petrini, from Yale-New Haven, said Connecticut’s health care market still has significant competition. It includes Connecticut-based chains Yale New Haven, Hartford HealthCare and Western Connecticut Health Network, as well as national hospital companies including Ascension Health – the parent of St. Vincent’s Medical Center in Bridgeport – and Trinity Health, which recently became the parent company of St. Francis Hospital and Medical Center in Hartford and Johnson Memorial Hospital in Stafford Springs, and is in the process of adding St. Mary’s Hospital in Waterbury.

So why are hospitals joining larger systems? Petrini cited the need to adapt to economic challenges.

“There’s a need to create more and more efficiencies, and that’s what growth is about. It’s not the competition,” he said.

And Petrini added that cuts to Medicaid funding and state taxes on hospitals “have more of a pronounced effect on things like pricing than market factors, especially in a state like Connecticut.”

Legislators in 2014 added two additional factors for OHCA to consider in the certificate of need process – based on the impact of the proposal on “the diversity of health care providers and patient choice” in the region and whether any consolidation the proposal leads to will adversely affect health care costs or access to care.

Although Capece, the Middlesex CEO, questioned the way CON regulations have been used in his hospital’s proposal, he said the process still has a place.

“If somebody wanted to plop some sort of medical equipment into Middletown, without having any history of serving this area, without having any basis for that, that to me is what the CON laws were designed to prevent,” he said. “You can argue that maybe having another piece of equipment and a competitor would maybe drive down costs, but I think what we’ve seen historically in health care is that the more capacity that exists, the more tests that are done and the more costs that are incurred.”

In one of its filings, meanwhile, Yale-New Haven suggested that allowing Middlesex’s proposal could open the door to other moves.

“[I]f the Applicant were allowed to place a linear accelerator in Westbrook solely based on the fact that it has a small population of existing patients from that area, then it may set precedent for other institutions to do likewise,” Rebecca Matthews, an attorney representing the hospital, wrote. “For example, YNHH could use this precedent to propose relocation of a linear accelerator to Middletown because we have many patients from that area who choose to be cared for by YNHH.”

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