Reform of Georgia’s healthcare system stalled last week when the Georgia House voted down the most sweeping reforms to Georgia’s Certificate of Need (CON) laws in decades.  Certificates of Need are essentially state issued monopoly grants that allow hospitals and some other health care providers to operate in a given area.

The measure, House Bill 198, failed by a vote of 94-72.  It targeted many practices adopted by Georgia’s non-profit hospitals that appear to some to be driven more by profit motive than by delivering the maximum amount of care at the lowest cost.  Given the amount of money that flows through Georgia’s medical system, it also attracted full lobbying efforts on both sides, pitting those wishing to protect the status quo against those who see opportunity in a more deregulated, competitive system.

HB 198 would have increased the amount of transparency placed on non-profit hospitals, with measures to require disclosure of executive compensation, cash reserves, and real estate holdings.  It would have prohibited non-profits from purchasing “medical use rights” from commercial property owners, which prohibit competitors from opening medical facilities on the designated premises.

The bill would have allowed for hospitals to open freestanding emergency rooms and cardiology ambulatory surgery centers.  Indigent care requirements for hospitals were proposed to increase, while CON restrictions on substance abuse facilities and mental health treatment centers would be lifted.  Current nursing home CON restrictions would not be affected under this bill.

If passed HB 198 would have increased Georgia’s tax credit program for rural hospitals from $60 Million to $100 Million per year.  This allows taxpayers to receive a credit on their taxes for contributions made to struggling rural hospitals in the state.

The failure to pass the bill prior to the March 7^th “crossover day” makes passage of the measure this year difficult, as a bill must pass either the House or Senate by that day to be considered by the other chamber.  Supporters of the measure believe the reforms will be seen again this session, however, and are considering attaching the proposals to other active legislation.

The House is still set to consider Senate Bill 106, the “Patients First Act”, which creates a process for Georgia to apply for a Medicaid waiver from the Federal Government.  The waiver, if granted, would allow Georgia to draw down federal Medicaid funds similar to other states that have expanded the program under the Affordable Care Act.  The purpose of the waiver would be to allow Georgia policy makers to alter the program to match specific needs in the state.

An attempt to address Georgia’s disparity between cost of service and reimbursement rates under the state’s Medicaid program is not specifically addressed in either measure, but could be part of a Medicaid waiver request.  Many rural hospitals estimate that they currently recover less than 90% of the cost of service on Medicaid patients.  Individual practitioners often recover even less, virtually requiring them to associate with hospitals in rural areas to ensure a private practice is viable in areas where they can expect to lose money on the majority of their patients.

A recent estimate of rural Georgia patients that providers will see include four out of five that are on Medicare, Medicaid, or uninsured.  Hospitals and doctors can expect to lose money on each of these patients, and there is not enough margin from those patients with private insurance to make up for these losses.

Whether parts or all of the CON reforms are successfully attached to legislation that passes this year, the process of reforming Georgia’s medical delivery system will remain a work in progress.  The request for waivers under the Medicaid program may ultimately complicate the issue.  It could also, by increasing reimbursement rates closer to costs of services provided, make some of the proposed reforms more tolerable to those organizations currently working against them.