Surgery Centers 3, Alliance 0

February 3, 2006
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GRAND RAPIDS — It appears that Holland, Muskegon and Big Rapids will each get a new ambulatory surgery center, against the best wishes of West Michigan’s health care advisory watchdog, the Alliance for Health.

In its last two meetings, the alliance’s evaluation board recommended that the Michigan Department of Community Health not approve the certificate of need applications of the three groups hoping to start the surgery centers. On Jan. 25, the department did not adopt the alliance’s recommendations and granted all three certificates of need, albeit with conditions.

That was an unpleasant surprise for Lody Zwarensteyn, president of the alliance. In December, he told the Business Journal that the state has historically agreed with his group’s recommendations “99 percent of the time.” He predicted that the applications for Muskegon Surgery Center LLC and West Michigan Surgery Center of Big Rapids would likely be rejected.

In January, the evaluation board recommended that the state not grant a CON to the applicants from Holland SC LLC. The alliance board and staff both found that the proposed facility would draw business away from Holland Community Hospital and Zeeland Community Hospital. State regulations require a new surgical facility to meet a demand in the community without taking surgical cases away from existing facilities.

Evidently, the department of community health did not agree that the new facility would pose such a threat. Director Janet Olszewski was unavailable to comment on her decision to approve the applications, contrary to the alliance’s recommendations. The three CON approvals were not clean-cut, however. The final approval of all three applications is predicated upon the applicants’ ability to satisfy several conditions and stipulations.

In the case of the Holland facility, the state is asking for further written proof documenting the applicant’s need for four operating rooms. If the applicant cannot provide such evidence within two weeks, the state may reduce the number of operating rooms it will allow in the facility.

The Muskegon facility’s application could be rescinded if the applicant cannot appropriately refute any information the state may receive challenging the validity of the CON application. Should such challenges arise, the applicants would have two weeks to provide the necessary supplementary information.

In the case of the Big Rapids surgery center, the alliance’s primary rationale for refusing to endorse the facility was because it included reimbursement from Blue Cross Blue Shield of Michigan in its financial forecasts. According to the alliance, Blue Cross does not deal with facilities with only one operating room (as is proposed in this application) unless they are in remote, rural settings. Additionally, Blue Cross payment does not begin until the third year of operation for a facility. The state acknowledged this potential sticking point, and required the applicants to provide proof that the facility would be able to obtain Blue Cross funding, lest the approval be reversed.

The future of several other CON applications may have been altered by a later decision made by the department of community health. In December, the CON committee ratified changes to the standards used in awarding certificates of need for surgical facilities. The new standards require that all surgical cases used in CON applications be cases that were handled in licensed operating rooms, not procedure rooms or physicians’ offices. After a period that allowed for legislative and gubernatorial review, the state implemented the new standards as of Jan. 31.

At least one application recently endorsed by the alliance will be adversely affected by the change in regulations. Zwarensteyn said that the application of West Michigan Surgery Center of Grand Rapids will likely fail because the surgical cases cited in the application were not performed in an operating room setting. The applicants for that facility were unavailable for comment. The state’s decision on the application is due March 1.    

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