Suit Targets Hospital Bed Moves

June 23, 2003
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In seeking to have a portion of Michigan's recently revised certificate-of-need law set aside, five hospitals in eastern Michigan are asking the court to go well beyond what the state attorney general has already said — that a portion of the measure allowing hospitals to relocate beds without any public scrutiny is unconstitutional.

If successful, the lawsuit would effectively block inner-city hospitals from building new inpatient facilities in the more lucrative suburban market of Oakland County and using the profits there to help ailing operations at their hospitals within Detroit that are stuck with high uninsured and underinsured patient populations and heavy financial losses.

The hospitals that filed suit against the state last week are adamantly opposed to language written into the law that essentially would allow three Detroit hospitals to transfer beds to a market that already has an excess of capacity, without the normal CON review designed to prevent the costly duplication of health care services within a market.

The litigation, expected by many within the health care industry in Michigan, comes at a time when hospitals everywhere are struggling with tight finances in an era of rapidly escalating health care costs.

"They don't believe the answer to the health care crisis is the expenditure of hundreds of millions of dollars in a market that is already over-bedded," said Stephen Afendoulis, an attorney with Varnum, Riddering, Schmidt & Howlett in Grand Rapids who's serving as lead counsel in the lawsuit for three of the plaintiffs.

The target of the litigation is a provision in the revised CON law, enacted in December by lawmakers during the waning days of the lame-duck legislative session, that would allow three inner-city Detroit hospitals to relocate inpatient beds to new hospitals they want to build at existing outpatient centers in neighboring Oakland County.

As part of the law, lawmakers left it up to the state's Certificate of Need Commission to review the language and, if members decided it would cause harm to the delivery of health care, delete it.

The lawsuit has statewide implications because of a separate provision included in the CON rewrite that would allow hospitals and health systems anywhere in Michigan to move beds to a sister facility within a state-designated health services area — without a CON review to justify market demand.

The revisions in the CON law also have their origins here in Kent County, where local lawmakers began looking into CON after Metropolitan Hospital executives claimed they were having problems securing the OK needed to relocate to a proposed new suburban campus.

The legal argument of the five hospitals behind the lawsuit echoes the view of the Attorney General's office, which said in a recent memo to CON commissioners that the bed-relocation provision, inserted into the bill just before passage, is unconstitutional because legislators cannot give away their statutory authority. That prompted the panel two weeks ago not to act on the issue.

In the lawsuit, the plaintiffs are asking an Ingham County Circuit Court judge to go beyond what the Attorney General's office stated and rule the entire bed relocation provision unconstitutional. They argue that since lawmakers enacted the law with the understanding the CON Commission could rescind the relocation provision, the entire section needs to go.

"It would never have come into law without those safeguards," Afendoulis said. "They are so inextricably intertwined, this legislative scheme is unconstitutional."

That argument is one of two claims made in the suit. The other centers on what the lawsuit contends is the special nature of the updated CON law.

Afendoulis claims that because one of the provisions was written so narrowly, exempting from CON standards only a handful of hospitals that want to relocate beds to the Detroit suburbs, that lawmakers should have considered it "special legislation." Under the Michigan Constitution, special legislation required a two-thirds majority vote in the state House and Senate to pass, as well as a vote of the people within the communities affected.

Plaintiffs in the lawsuit are Botsford General Hospital in Farmington Hills, health system Trinity Health, Covenant Medical Center in Saginaw, William Beaumont Hospital in Royal Oak, and Mount Clemens General Hospital, as well as three individuals.

Defendants include the Michigan Department of Community Health, the Michigan Department of Consumer and Industry Services, and Providence Hospital and Medical Centers Inc. and Henry Ford Health System.

The case has been assigned to Ingham County Circuit Court Judge James Giddings. The court has scheduled a June 30 hearing on a preliminary injunction preventing any bed relocations.               

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