Iowa Certificate of Need Law Under Constitutional Attack

Iowa has become the latest battleground in a nationwide effort to challenge state “certificate of need” laws.  Since 1977, Iowa’s certificate of need (“CON”) law has required approval for any “new or changed institutional health service.”  The Iowa General Assembly enacted the CON law to avoid unnecessary duplication of healthcare services and to ensure access to critical healthcare services for people of all socioeconomic levels. 

Iowa’s CON law generally applies to proposals related to cardiac catheterization, open heart surgery, organ transplantation, radiation therapy, and outpatient surgery services.  It also applies to proposals to establish or expand hospitals, nursing facilities, and certain other institutional facilities.  The State Health Facilities Council is a five-member body of lay-people appointed by the Governor, confirmed by the Senate, and is responsible for approving or denying CON applications after submission of written filings and a hearing. 

On June 13, 2017, two Iowa physicians filed a lawsuit in the United States District Court for the Southern District of Iowa challenging the constitutionality of Iowa’s CON law.  On September 1, 2017, the plaintiffs filed an Amended Complaint.  As amended, the plaintiffs include: (1) Dr. Lee Birchansky, a Cedar Rapids ophthalmologist, and his outpatient surgery practice; (2) Korver Ear Nose and Throat, LLC, an ENT practice in Orange City; (3) one of Dr. Birchansky’s patients; and (4) one of Korver Ear Nose and Throat, LLC’s patients.  In addition to the plaintiff’s local counsel in Des Moines, the plaintiffs are also represented by attorneys employed by the Institute for Justice, a libertarian public interest law firm based in the suburbs of Washington, DC. 

The plaintiffs allege that Iowa’s CON law violates the Equal Protection, Due Process, and Privileges and Immunities Clauses of the Fourteenth Amendment to the United States Constitution.  Specifically, the plaintiffs allege that Iowa’s CON law “arbitrarily prevents medical entrepreneurs from offering safer, less costly, and more convenient medical procedures” and that the “only purpose” of Iowa’s CON law is “to protect established Iowa healthcare facilities from economic competition.” 

The challenge to Iowa’s CON law follows a similar challenge in Virginia.  In 2016, the United States Court of Appeals for the Fourth Circuit upheld Virginia’s more expansive CON law against a constitutional challenge.  The plaintiffs in that case—also represented by the Institute for Justice—alleged that Virginia’s CON law constituted an undue burden on interstate commerce in violation of the Commerce Clause of the United States Constitution.  The Fourth Circuit concluded that Virginia’s CON law “serves an array of legitimate public purposes: improving health care quality by discouraging the proliferation of underutilized facilities, enabling underserved and indigent populations to access necessary medical services, and encouraging cost-effective consumer spending.”  Although there is no way to predict the outcome of the challenge to Iowa’s CON law, the Fourth Circuit’s decision is certainly instructive.    

In July, by a vote of 3 to 2, the State Health Facilities Council voted to grant a CON to Dr. Birchansky’s Fox Eye Surgery, LLC, to establish an outpatient surgical facility.  The Council issued a written decision on August 24, 2017.  It remains unlikely, however, that the outcome of that hearing will have a significant impact on the pending lawsuit. 

The Health Law Practice Group at BrownWinick will continue to monitor developments related to the pending lawsuit.  If you have any questions, please do not hesitate to contact your BrownWinick attorney or any member of the firm’s Health Law Practice Group.