Health care CON projects dip in 2009

December 21, 2009
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The value of Michigan Department of Community Health-approved capital acquisitions and construction fell over the first 11 months of 2009, compared to the same period in 2008, in Kent and Ottawa counties.

From Jan. 1 to Dec. 15 in Kent County, the Michigan Department of Community Health’s Certificate of Need Commission approved $33.5 million worth of projects. That included the purchase of Positron Emission Tomography scanners, computerized tomography scanners and cardiac catheterization equipment, as well as $8.6 million for the build-out and equipment for Metro Health Hospital’s Mid Towne Surgery Center.

Over the same period in 2008, some $144.7 million worth of projects in Kent County gained CON approval. Those covered PET and CT scanners as well as magnetic resonance imaging machines, two building additions for psychiatric beds, additional operating rooms and an expansion and a renovation of nursing homes.

A number of the equipment purchases were associated with Spectrum Health’s ongoing construction projects, including the Lemmen Holton Cancer Center and the Helen DeVos Children’s Hospital.

In Ottawa County, CON project approvals dropped from $24.68 million from Jan. 1 to Dec. 15, 2008 to $15.67 million during the same time period this year.

Overall in Michigan, $621.77 million worth of projects moved through the CON pipeline in that period of 2009, compared to $2.5 billion during those dates in 2008.

The struggling economy, frozen capital markets and Michigan’s nation-leading unemployment rate have created “the perfect storm,” Alliance for Health President Lody Zwarensteyn said.

The nonprofit health planning agency reviews Certificate of Need applications from 13 West Michigan counties before they are examined by MDCH staff.

“Is it time to expand when people are losing jobs, losing insurance, there’s rising deductibles, some facilities have seen a downturn in utilization and seen downturn in collections? It sounds like the perfect storm is finally hitting,” he said.

Michael LaPenna, who heads health care consultancy The LaPenna Group Inc., based in Grand Rapids, said lingering negotiations over health care reform in Congress cast a pall of uncertainty over health care business decisions this year. He said he expects that to continue until the House and Senate meld their two bills into a law to put before President Barack Obama.

“It’s the uncertain nature of how national health care reform is going to impact hospitals, and hospitals are the ones that have the capital planning process that would necessitate access to a CON,” LaPenna said.

The bills also contain provisions that would deter physicians from investing money into new imaging or diagnostic projects, he said. Even without national health care reform, changes anticipated for 2010 in reimbursements and how doctors are compensated for capital investments are dampening that market, he added.

“Michigan has been hard hit by the recession … and has a CON law that’s very aggressive, combined with reimbursements on a national level having a negative effect on physician investment. Add to that a state budget process that doesn’t allow local institutions to understand what’s going to happen with Medicaid or state employee health care funds. … All of a sudden in Michigan, we’re sort of frozen,” LaPenna said.

Michigan’s CON law covers expenditures such as beds, surgical facilities, some imaging equipment such as computerized tomography scanners, positron emissions therapy scanners and magnetic resonance imaging, psychiatric services, lithotripsy, specialized heart services and construction, Zwarensteyn explained. Many other capital expenditures fall outside the CON pervue, he said.

“When you look at what the investments were, they were imaging equipment — that’s where the profits are. They look at investing in surgical equipment — that’s where profits are,” Zwarensteyn said. “People invested in areas that would have returns to them.”

Even good projects can completely stall when they run into capital markets that just are not responding, LaPenna said.

“You can have the best project in the world, take it forward, and something that would have been easily approved two years ago and approved with difficulty a year ago, I wouldn’t even waste my time in this environment,” he said.

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