Webinar highlights need to get rid of medical ‘certificate of need’ laws

Three experts explained Monday how CON laws have throttled Hawaii’s ability to cope with its healthcare needs

Hawaii anachronistic medical “certificate of need” laws have percolated to the top of local discussion in recent months, especially as more people have realized their connection to Hawaii’s lack of healthcare capacity in the wake of the coronavirus crisis.

Hawaii’s CON laws, in fact, are the strictest in the nation, covering 28 different medical services and leading to the fewest hospital beds per capita in the nation. Since 2006, state officials have rejected over $200 million of private healthcare investments, which would have added more than 200 hospital beds to meet Hawaii’s medical needs.

On Monday, the institute sponsored a webinar on the topic, “How CON laws have limited healthcare in Hawaii” (see video below). The event drew extensive news coverage on Maui, likely due to the participation of Joe Pluta, president of the West Maui Taxpayers Association, who has long campaigned for a second hospital on the island.

“For West Maui,” reported Dakota Grossman of The Maui News, the commute to Maui Memorial Medical Center in Wailuku “is lengthy and often too far away in emergency situations,” and “this second hospital is critical.”

He quoted Pluta as saying it’s a “life or death issue,” but obtaining a certificate of need has been “a tremendous challenge,” and it will take “convincing the legislatures who have the power” to move the project forward.

Sal Nuzzo, director of the Florida-based James Madison Institute’s Center for Economic Prosperity, explained during the webinar that medical CON laws came into being at the insistence of the federal government. In a rare move, the federal government later said it had made a mistake and urged their repeal. However, since they are state laws, repeal — or even reform — hasn’t been so easy, especially since they benefit special interests.

Grossman also quoted Naomi Lopez-Bauman, healthcare policy director for the Arizona-based Goldwater Institute:

“It really is time for Hawaii lawmakers and policymakers to take a hard look at what they want for the state in terms of health care access and affordability,” Lopez-Bauman said. “If they want patients to have better services at a lower cost, and to be in more abundance, they really need to eliminate these laws.”

Institute President Keli’i Akina moderated the discussion; Josh Mason, institute marketing director, fielded questions from the audience.


11-15-21 webinar on “How CON laws have limited Hawaii’s healthcare capacity,” with Naomi Lopez, Sal Nuzzo and Joe Pluta

Josh Mason: Aloha, and welcome to the Grassroot Institute of Hawaii webinar today. My name is Josh Mason. I am the director of marketing with the Grassroot Institute.

We’re very excited to be presenting this to you. Without further ado, I’ll introduce you to the moderator of this webinar, which is Keliʻi Akina, president and CEO of the Grassroot Institute of Hawaii. Keliʻi.

Keliʻi Akina: Thank you, Josh, and aloha, everyone. Thank you for joining us today at the Grassroot Institute of Hawaii.

We have all experienced the problem of a shortage in our healthcare supply here in the state. In our state, we have the kinds of emergencies that can be very dramatic and put a huge demand on our healthcare. For example, hurricanes, tsunamis, pandemics. But when we analyze a situation, are these emergencies the real problem and the real cause of our healthcare supply shortage, or are they a symptom?

Today we’re going to suggest that they’re a symptom of something else: government regulation. Our webinar is entitled “How CON laws have limited healthcare in Hawaii.”

When we talk about improving healthcare in the state, we often think of doctor shortages and lack of access to care, particularly if you live on the neighbor islands. What few people realize is that healthcare in our state is heavily affected by some obscure regulations called the certificate-of-need laws. That may sound strange to you because we often don’t hear much talk about certificate-of-need laws, and that’s why we’re holding today’s webinar. It’s a very important piece of understanding our healthcare shortage in Hawaii.

In simple terms, a certificate of need is a government approval that must be obtained before building a new facility, or offering new services, or even making a significant change to existing ones. For example, in Hawaii, you have to get a certificate of need to purchase an MRI machine, or open a dialysis center, or even change your hospital beds from acute care to surgical.

This certificate of need is extremely important. In fact, Hawaii has one of the most restrictive certificate-of-need schemes in the country. This law requires a certificate of need for 28 medical services, everything from ambulance services to rehab centers. It’s no coincidence that Hawaii also has the fewest hospital beds per capita in the United States.

One of the lessons we’ve learned from this COVID-19 pandemic is that our state needs to take a serious look at the reasons for our lack of hospital beds and healthcare access. That means seriously considering reforming our certificate-of-need laws, which have problems with it, one of which is that when people come to certificate-of-need boards, they encounter their competition, the other hospitals, as decision-makers, as to whether or not new facilities will be allowed into the market.

Today, I’ve got three experts with us. Two of them have studied this at a national level and understand the situation from across the country, and one joins us from the island of Maui to give us a bird’s eye view of the problems of certificate of needs.

I’d like to welcome to our program today Naomi Lopez, healthcare policy director for the Arizona-based Goldwater Institute, a partner institute with the Grassroot Institute in the state policy network.

Naomi, so glad you’re joining us today. Thank you for being with us.

Naomi Lopez: It’s my pleasure to be here with you.

Akina: We’re glad to have you on board, enjoy collaborating.

Naomi is the director of healthcare policy for the Goldwater Institute. That’s where she leads the institute’s efforts to implement federal and state healthcare reforms that benefit all Americans. Lopez has 25 years of experience in policy and previously has served organizations, including the Illinois Policy Institute, the Pacific Research Institute and the Cato Institute.

Naomi holds a BA in economics from Trinity University in Texas and an MA in government from Johns Hopkins University.

Naomi, in a few moments, I’ll ask you some questions. Thank you for being with us.

Our second guest today is Sal Nuzzo. He’s the director of the Florida-based James Madison Institute Center for Economic Prosperity.

Sal, good to have you on board today. Thanks for joining us. We don’t hear your sound; perhaps you need to unmute.

Sal Nuzzo: Thank you for having me. It’s a pleasure.

Akina: Glad to have you, Sal. We’re looking forward to chatting with you in a few minutes.

Sal Nuzzo is vice president of policy and the director of the Center for Economic Prosperity at the James Madison Institute. In addition to promoting greater economic opportunities, the institute has been the focus on promoting healthcare reform as Florida’s aging population grows.

Sal earned his B.S. in economics in a concentration on public policy from the Florida State University while serving as an assistant legislative analyst with the Office of Program Policy Analysis and the Government Accountability Organization.

Thanks, Sal. Looking forward to chatting with you.

Our third guest is a dear friend here on the island of Maui who has experienced firsthand the shortages of medical services, especially for neighbor islanders. He’s Joe Pluta, West Maui Taxpayers Association president.

Joe, thanks for being on the program today. We need you to turn your video on and audio. There you are, Joe. Say, “Hi,” to everybody.

Joe Pluta: Aloha, everyone. Thank you very much. It’s a pleasure to be here.

Akina: Look forward to chatting with you.

Joe Pluta has been a licensed real estate broker in Hawaii since 1972. He’s also the president of the West Maui Taxpayers Association. In addition to his role as a taxpayer watchdog, Joe’s been a big supporter of the construction of new hospital facilities for the West Maui community. Joe graduated from the University of Hawaii with a bachelor’s in travel industry management and real estate.

Joe, looking forward to chatting with you.

Pluta: Thank you so much.

Akina: Great. I’m going to open up by asking each of the panelists some questions and dialoguing with them a little bit.

Then, I want to invite you, while I’m doing this, audience members, to send us your questions. You can do that if you’re registered on the webinar. Unfortunately, we won’t get your questions from Facebook. If you’re on the webinar, feel free to ask these experts anything you want.

It would be helpful to us if you would address your specific questions to individual members of the panel. Look forward to answering those later on.

First, let’s chat with each of them, and then halfway through, we’ll go to questions and answers.

Naomi, can you just set us up right now and tell us what certificate-of-need laws are? How in the world do they work?

Lopez: The certificate-of-need laws are basically permission slips that are granted by a board that’s usually controlled by the would-be competitors of people that want to enter the healthcare marketplace. For example, it would be similar to Safeway getting a veto stamp, and deciding whether or not Whole Foods gets to set up shop in the state.

It’s absurd that in 2021 that these decades-old laws are still in existence. Hawaii has more certificate-of-need laws than any other state in the country.

It’s really important for Hawaiians to know that there are some states that have zero, no certificate-of-need laws, and they are doing just fine. In fact, when it comes to healthcare access and affordability, they’re actually doing better than Hawaii.

It really is time for Hawaii lawmakers and policymakers to take a hard look at what it is that they want for the state in terms of healthcare access and affordability. If they want patients to have better services at a lower cost and to be in more abundance, they really need to eliminate these laws.

Akina: Naomi, you’ve studied CON laws across the nation, and you’ve seen the effect that they’ve had on the healthcare access within different states, as well as the cost within those states, and you’ve looked at Hawaii.

What is the impact of CON laws on healthcare access and cost?

Lopez: I think that the audience might actually know some firsthand stories. Let’s take, for example, an older couple where one of these spouses needs to go into long-term care. That’s a very difficult decision. It’s very personal, but because the state of Hawaii restricts the number of nursing home beds that are available without going to get the certificate of need, those beds are not even available.

If someone is having a mental crisis, for example, a lot of these individuals end up in the criminal justice system and not in the medical facility that will provide them the psychiatric services that they need.

If a baby is born and needs to go into ICU immediately, that’s another example where that service may not be as readily available.

Just because you don’t have certificate-of-need laws doesn’t mean you automatically have all these services at your disposal, but it certainly does create a huge obstacle to having those services in your community.

Given that we’re in the information age, we’re in an age where telehealth services are now becoming more and more available, it’s absolutely absurd that the state of Hawaii is running their medical marketplace like they’re still in the 1970s.

Akina: Let me ask you this last question here.

I’m wondering as I’m listening to you — and you’re very passionate in giving us examples of problems with CON laws — I’m wondering why states would pass them intentionally in the first place.

Frequently, defenders of certificate-of-need laws say that we need these laws in place to make sure that there’s sufficient healthcare services for the underprivileged, for those in the rural areas, for example, and low-income patients. How would you respond to that?

Lopez: The certificate-of-need laws were established in the 1970s, when the way that healthcare was paid for was much different than today. What used to happen is that government payers would give a hospital money for, for example, medical technology or for a certain number of beds.

The payment model of healthcare has completely changed. We’ve had Republican and Democrat administrations at the federal level come out and both say that it is time to end these laws.

Many states have, in fact, taken steps to repeal these laws, and those states are doing just fine. In fact, they’re actually doing better in many ways than the states that have retained these certificate-of-need laws.

These laws are crony laws. They are in place today because the would-be competitors don’t want to allow a new competition. That hurts patients. It’s time to put patients first and allow the market to work.

Akina: Thank you, Naomi. It sounds as though you’ve got a keen view of this, and, in particular, you see the problems, with the impact on economic freedom and how that  ultimately hurts consumers in the long run.

I’m going to go now to Sal.

Sal, you’ve been working on solving this problem with certificate of needs. Your organization, in fact, and I commend you, has helped Florida remove some CON laws. Tell us a bit about the reforms that you’ve supported and how you brought about some change.

Nuzzo: Sure. To echo a lot of Naomi’s points, just one in particular that I’ll make is that the federal government implemented CON laws for all states back in the ’70s. By the 1980s, the federal government did what it almost never does. It came out and said, “We made a mistake; CON laws are not working,” and they encouraged every single state to repeal them wholesale. That actually requires a state that has implemented them to pass legislation and pass a policy reform that would take them off of the books.

That has been, as Naomi said, a very intense challenge, because once you have these programs in the books, the existing market players — the hospitals, the ambulatory surgical centers, the providers — they like them because it allows them to limit their competition, so getting them off the books is, in fact, a challenge.

Florida began this process probably 10 years ago, and every single year, we made a little bit more progress in helping to advance the conversation. Some years, we would just get a meeting with a few legislators, and the hospital-lobbying organizations would pour lots of money and time and energy into keeping them there.

In other cases, we would see a piece of legislation begin to advance, and it would move in one committee and one chamber of the legislature or the other, but it wouldn’t get through the entire process. The actual reform, getting across the finish line, happened in 2019. Our incoming speaker of the house, a gentleman legislator by the name of José Oliva, took as his leadership agenda free market healthcare reform at the top of that list.

In Florida, because we have term limits on our legislature, the speaker of the house serves one two-year term. He wanted free market healthcare reform to be his legacy, and CON repeal and CON reform was the first step of that, and there were a number of other things.

In 2019, we were able to see, through his work with the legislature and his leadership in working with his counterparts in the Florida Senate, a repeal of almost all of Florida’s CON laws: hospitals, tertiary facilities, ambulatory surgical centers, MRI machines, and a number of others.

What [was] left were two specific ones. They were the nursing home and hospice centers. We still have a certificate-of-need program for and for ambulances. That was the process, and it took an effort that involved other states, think tanks that have helped in the process. It involved us.

It involved our partners in grassroots and in advocacy like Americans for Prosperity and other organizations that came to the debate and dialogue with facts and figures.

It also took a story. It took one specific story of a city in southwest Florida that about 10 years prior had applied for a certificate of need to establish a new hospital. That certificate-of-need application was vetoed by a competitor in a close, approximately hour away, city that had a hospital. They claimed that the city had overstated their population projections over the 10-year period.

Ten years had fast-forwarded, and it was 2019, and, lo and behold, that city did not overstate, they had understated their population projections. Residents of that city were having to drive an hour to an hour and a half to meet a specialist, to go see a cardiologist, to get to a hospital if they needed one. That galvanized a lot of legislators’ support and allowed us the ability to put a human face on the statistics that Naomi and I and others talk about quite a bit.

Akina: Very good. Quickly tell us a bit about the opposition that you encountered, and who or what really was the biggest opposition? What did they have to say to your efforts to reform CON laws?

Nuzzo: It was effectively an effort that had been opposed by the existing medical hospital — the speaker called them the hospital-industrial complex. They like to wield power. They are a very well-funded special interest group or series of groups.

Their opposition mainly occurred in a couple of different forms. They would argue that CON laws save Florida money because of Florida’s elderly community and the fact that hospitals, a lot of times, are paid through either Medicaid or Medicare, and the state has to fund a share of especially Medicaid, that that was going to have a pronounced negative impact on Florida’s fiscal situation.

It was also claimed that the process itself was designed to determine need, and that process was working. Little by little, we had to chisel away at those arguments over a period of time. As we were able to do that, more and more members of the legislature came to see this as a necessary policy reform that had to happen.

Akina: I understand that there’s a new CON scheme taking place in Florida at this time. Can you tell us just briefly about what you’re looking out for?

Nuzzo: One of our CON programs sunsetted in 2021, earlier this year. What they’re beginning to do is see if they can gain the system a little bit, and instead of a “You have to apply” and then it goes before an administrative judge, and there’s a hearing and competitors can veto, we’re looking at the regulatory designations to make sure that those regulatory designations are not being gained by existing markets to say, “This is being challenged in administrative courts by another measure.”

We’re still looking to eliminate the CON programs for both ambulances and hospices and nursing homes, but unfortunately, the persuasive powers of those interest groups is just carrying the day at this point.

Akina: Thank you, Sal. Appreciate your insights. There’s a lot there to reflect upon as we think of our own situation here in Hawaii.

Now I want to bring Joe Pluta on board. Joe, it’s been great working with you and the West Maui Taxpayers Association. I enjoy the events I’ve been able to come out and speak at. You really do a great job of informing the public and getting many members involved in government. Congratulations to you for doing that.

This problem has vexed you for a long time, and you’ve got a lot of personal experience in dealing with the problems of the CON law. In particular, you know how much West Maui needs a hospital. Maui itself, as an island, needs another major hospital, but it’s been fruitless to try to get one established. What’s been your experience with that and the CON laws?

Pluta: Thank you so much for that and this opportunity to shed some more light on this. This issue is literally a life-and-death issue. I think, because of COVID, has given everybody a wake-up call in the world, and the whole world has changed. Everything’s changed dramatically. We’ve got to respond to change.

You say you can’t step in the same river more than once because it’s always changing. [chuckles] Never step in the same river twice. The only thing that’s constant is change.

When I came to Hawaii in 1969 and went to the University of Hawaii at that time after serving in the military in Vietnam, I was very delighted to have an awakening for the next 10 years of just how paradise could be.

I just loved living in Oahu there. The access to medical facilities was fantastic; it was wonderful.

When I moved to Maui to live here full time in 1979, I was just shocked to see how gorgeous; it was like going back in time to paradise. I also was shocked that our access to emergency medical services was basically nonexistent. We had one ambulance here on the west side only.

I was asked to join a community organization called the Honokowai-Napili-Kapalua Taxpayers Union, which I joined, and they made me in charge of membership. I said, “I’ll be in charge of membership if we’ll change the name to West Maui Taxpayers.” That was over 40 years ago. They agreed, and that’s when we formed. I was a founding member there to collectively get the needed capital improvements, especially for healthcare, brought to the attention of our legislators …

It’s been talked here by Sal, talked about all the powers in the legislators, the decision-makers. West Maui’s primary problem, like a lot of the neighbor islands, is that it’s an Oahu-centric Legislature, and the neighbor islands have very little influence when it comes to impacting state policies.

While Maui is such an important economic resource for the state of Hawaii, and West Maui gives over 50% of Maui County’s entire economic wealth to the state and to the county, from West Maui alone, a multibillion-dollar community had one ambulance [chuckles] and no access to emergency medical facilities. 

We undertook an effort to build a fire and ambulance station on our own. We were told by then-Mayor Linda Lingle that if we developed at our own expense a turnkey fire and ambulance station and dedicated [it] to the county as a gift, they would put it in the budget and the staff and operate it.

They said, “Good luck. It’s never been done before, and your odds of it happening are nearly impossible.” With God’s help — I’m also a man of faith; I’m president of a church; and I know that all things are possible — with God’s help, we entertained and went after a community effort, and we raised millions of dollars and built the Napili fire and ambulance station, which has been saving lives since it opened up in 1992.

When we got done with that, they said, “OK, you’ve done the impossible.” 

That’s never been done before, nor since, actually, anywhere in the state of Hawaii where a community on its own built a turnkey fire and ambulance station saving lives.

We had additional ambulances now and a fire station, and they have indeed saved lives. Economically, they reduced the fire insurance premiums to less than half of what they used to be at the very expensive West Maui property locations, which, in essence, gave a dividend to all the donors who gave us donations to build the hospital. They’ve gotten all their money back and have gotten a dividend ever since. 

After doing that, they said, “Joe, you’ve done the impossible. Now let’s get us a hospital in West Maui.” I said, “With God’s help, that’ll happen. We need to have it.” I know what we need to have it but, again, convincing the legislators who’ve got the power.

What’s been said earlier, I couldn’t agree more. It’s a tremendous challenge. When I have situations like this that are beyond a challenge, I pray, I do my research, I do the best I can, I get experts involved.

I was fortunate to attract experts in our board of directors. We had the former chief operating officer of Maui Memorial Hospital on our board of directors, Leann Strasen, who resigned, basically, [because] she said that she was embarrassed to be associated with that facility, and it needed to be replaced, and we needed something definitely on West Maui.

Her husband was dying of cancer. The treatment he was getting at the facility where she was the chief operating officer of, was substandard. He ended up dying. 

Anyway. … We undertook an effort to get a West Maui Hospital. I’ve got a synopsis on our West Maui Hospital website. Those of you who’ve got smartphones or computers that you have access, go to … www.westmaui.org, just www.westmaui.org. 

On there is a hospital synopsis. I’ve got that. I don’t want to take too much time reading the whole thing. Basically, we got the Kaanapali 2020 Community Planning Group, which I also joined and formed initially in … that was 1999; it’s been over 20 years, the Kaanapali 2020 Community Planning Group.

I convinced the members who were totally against development of any kind in West Maui to support a community plan together because we all had our input. One of the key components of that plan was to have a West Maui Hospital and Medical Center.

The company donated to that effort a 15-acre site, provided, however, it would be used for a West Maui hospital and that whoever would undertake that would get this 15 acres of prime land here in Kaanapali in the heart of Kaanapali for the facility.

With that, that’s how we did the fire and ambulance station. We had to get the land first. Now we had a tangible asset.

We had the land that could be donated for the hospital free of charge. Then we went out to the medical community at large to see who would help us. We had an incredible amount of interest all over the place. All these major medical providers that were interested in us said that, “What are you going to do about the state CON laws?”

We were told that they don’t care who you are or how good you are or how much the need is, there’s no way that they’re going to grant anybody a CON on Maui. We heard rumors that … was it Mayo Clinic? … investigation into that was told, “No, don’t waste your time. You won’t be successful.” That’s, regardless, one of the premier health hospital groups in the United States. They gave up.

These hospital operating companies told me that if you could just assure us that we could get a certificate of need, we’ll come in, and we will commit hundreds of millions of dollars to Maui. We believe in Hawaii and in Maui and the future, but we’re not going to throw money in a hole to be denied. The time and effort and money to be unsuccessful, we just won’t do it. We have to have some assurance.

I said, “I can’t give you any assurance other than we’ve already done the impossible. With God’s help, we’ll continue to do the impossible. The need is certainly there.”

We’ve got people dead on arrival to Maui Memorial hospital because they didn’t get there till over two hours after they dialed 911. As a Vietnam vet, I know that first hour, the golden hour, is so critical to our healthcare outcomes. If you don’t receive healthcare in that first critical hour, the tragic medical outcome is going to happen.

Akina: Joe, that’s quite a story. The obstacle of not being able to get a certificate of need is certainly preventing people from getting the care that they absolutely need in West Maui. 

We’re going to bring you back during the Q&A time, and you can answer some questions that people may have about that story and provide some other details.

I just want to thank you so much for your efforts and hard work. It shouldn’t be so hard; we should be able to get the solutions we need. Hopefully, that’s something we can tell our legislators.

Pluta: Thank you.

Akina: Thank you.

To the audience, you are now free to ask all your questions that you have of our panelists. We have many questions; we’re ready to go.

The only thing I would say to the panelists is because we have many, many questions, if you’d keep your answers as brief as you possibly can, we’ll be able to get as much participation as we can, moderate the questions, and then I’ll be back later on to say goodbye to you.

To moderate the Q&A time, we have a member of our Grassroot Institute staff, Josh Mason. Josh, you want to take it from here?

Mason: Absolutely. Thank you, Keliʻi.

Can everyone hear me OK? Awesome. Great.

This first question is for both Naomi and Sal. We’ll have Naomi go first and then Sal. The question comes from Jen Shields, asking, “How many states still have CON laws?”

Lopez: Most of the states still do have CON laws. There are 11 states that had zero CON laws, and there are another, I think, four or five that have maybe one, and they’re not particularly significant.

You’ve really got more than a quarter of the country with pretty much no CON laws whatsoever, but I would say that the CON laws impact Hawaii in a different way than they impact other states. Here’s why. You might have somebody near a state border, and they’re able to just easily cross the border by car to get the care that they need.

When you’re talking about Hawaii, you’re talking about having to get on a plane to go and get care. For example, San Francisco has a strong market of cardiac care, specifically for Hawaiians. When you think about how the CON laws impact each state, it’s particularly detrimental to those in Hawaii who don’t have the financial means to hop on a plane to get that care when needed or don’t have a second home in the mainland where they can stay and get care frequently.

Mason: Sal?

Nuzzo: Absolutely. Nothing I could add to that. Perfect answer.

Mason: A follow-up question to that, do you guys know when did most of the states opposed to CON laws start repealing them?

Nuzzo: I want to say that there were a handful of states that in the late ’80s repealed just based on the federal guidance, once the federal program went away.

Since then, it’s been one or two here, one or two there that have repealed. That’s my take on it. It’s not where it’s been a whole host of states have done it, or there’s been a snowball effect. It’s just been on a state-to-state basis.

Lopez: That’s correct. In the very beginning, I don’t believe every single state opposed CON laws, but most of them did, and it’s been a slow repeal over the decades.

Think about healthcare. How many examples do we have where both Republican and Democrat administrations are pushing the same exact healthcare policy? This has been happening over the past couple of decades, where both Republican and Democrat administrations have been encouraging states to repeal these CON laws because they’re completely counterproductive to healthcare access and affordability.

Mason: Great. Thank you. This next question is for Joe. The question comes from Jeffrey, who asks, “Should we be focusing on a more participative model to increase healthcare in Maui?” For example, work with big business in the state to bring urgent care, or standalone emergency room or critical care/need hospital.

Pluta: Thank you. That’s exactly what I’m doing.

One of the things we have done or we did, we were successful in getting a CON for West Maui Hospital. I didn’t finish my long diatribe. For 42 years working on something, this is my life. Friends of mine are dead because they didn’t have access to emergency care — people I loved very much. This is my community; I’m fighting for my community, and I’m very passionate about it.

We did the impossible. We got a certificate of need for a West Maui hospital in 2009. Then financial challenges for that developer and everybody — what happened in 2008, 2009 — the whole United States had a tremendous financial catastrophe, and that set him back big time.

Then the state Supreme Court passed a law prohibiting the land that we had set aside for this hospital. It had 80 yards of ceded land for a temporary access way easement to the hospital site that was on ceded [land], that was all signed off and ready to go, but we couldn’t get final subdivision because the state Supreme Court said no longer can any ceded lands be permanently encumbered. That, in essence, killed over six years of work and hundreds of thousands of dollars.

That whole hospital site no longer became a feasible opportunity because it added another alternate way into there ahead of time. To start construction would have added $4 million or more to the project, and that made it no longer financially feasible.

We got subdivided another lot, and we’re working on now; they’re going to build a West Maui hospital. Instead of the initial 20 beds, they’re proposing to reduce it to five critical access beds, as a critical access hospital with five. Like a free, alone-standing emergency room, that’s what someone was talking about.

In essence, that’s what it would be, but they also need the CON for a skilled nursing facility, which would also be on the same campus with 40 beds. You’d have the five beds with the skilled nursing facility, and they have swing beds, which can be used for intensive care’s access or acute care beds, because they’re called swing beds for those who don’t know what that terminology is. We are doing exactly what … 

Mason: They’re asking …

Pluta: … what they’re asking, yes.

Mason: [chuckles] Great. Thank you. Thanks so much, Joe.

This next question is to Naomi. It comes from Mark Monoscalco. How do CON laws restrict telehealth in Hawaii?

Lopez: Telehealth is actually a little bit different than the certificate-of-need laws. The states regulate telehealth within their borders for the nonfederal programs, and so in Hawaii, Hawaii has passed laws that do allow for telehealth.

One of the important reforms that could be made, though that could be the topic of a future panel, would be to allow for Hawaii to pass a law that would allow licensed practitioners in other states to merely register with Hawaii to provide those telehealth services. That is something that Florida has done; it’s something that Arizona more recently did, in addition.

Right now with telehealth, a provider has to obtain a license in Hawaii and not merely just be in good standing in their own state. That’s a really important reform that would really advance telehealth within the state.

Mason: Great. Thank you.

Another question from Mark, and this is to Sal. Mark is on our board. [Chuckles] “How can the Grassroot Institute of Hawaii build a coalition similar to the coalition in Florida to reform CON laws in Hawaii?”

Nuzzo: Sorry. That’s really the operative question for not just this panel but then moving forward. You have an hourlong discussion, you get a lot of great information, and you want to say, “All right, what now?”

I would suggest a couple of things. One is reaching out in state and finding out who are the organizations that you have at your disposal that do either advocacy work, grassroots work or research work, in addition to what you all do on a day-to-day basis with your Legislature, who has influence with policymakers.

Then, just begin to gather them informally and say, “Look, this is something that’s gaining a lot of momentum in other states; it’s a reform that could absolutely benefit Hawaiians on a day-to-day basis, and it’s something important to our state to be able to move forward with.”

Next strategy is got to be reaching out to organizations and individuals that have walked the path in their states over the course of the last five to 10 years. To begin to glean from them all of the different landmines, all of the different things you don’t want to do, all of the ways that you want to be prepared to compromise versus be prepared to not compromise, and gather your own strategy for how you’re going to attack this via educating the public, educating lawmakers, working on a multimedia or messaging strategy for this.

It’s a very wonky, detail-oriented set of regulations that you’ve got to get public support behind. The way that you’re going to have to do that is to make it digestible for an everyday person who’s not engaged in healthcare policy.

Then, lastly, is find the best legislative champion you can. For us, we got very fortunate by not just having our House speaker want to do it, but he was not in the healthcare industry; he was, of all things, a cigar maker. We had a legislator who was an ER doctor who was the house healthcare committee chair, who championed this and was able to bring a lot of the disparate units together in 2019.

That’s a quick rundown of ways that I would approach putting this together as quickly as possible.

Mason: Great. Thank you.

This next question comes from Ashon. I’ll ask it of Joe first. It’s for everyone, but we’ll have Joe go first: “Are there any aspects of CON laws that serve a good purpose?”

Pluta: I don’t know about that.

Again, I think anything that was enacted into law always started with a good purpose and had good intention. People worked very hard to convince people to make those decisions because they did serve a good purpose.

The people in healthcare are very compassionate, wonderful people. You can’t meet a better group of individuals because they are definitely concerned with making the world a better place and helping life.

I don’t know what all the other CON laws are. I do know what’s happening in Hawaii, maybe more than anybody else, because this has been an obsession of mine; for over 40 years I’ve been working on this. I don’t know anyone else in the state of Hawaii who’s done that and has gathered as much. I know more than I want to know about all this.

The more you know, the scarier it gets, actually. It’s a big challenge.

Mason: Thanks for answering, Joe.

Naomi, did you want to take a crack at that?

Lopez: I would say that any healthcare policy should be evaluated by its results, not by its intentions.

We know today that the CON laws are detrimental to patient access and affordability, and probably most detrimental to those individuals who don’t have the means to travel other places for their healthcare. I think that’s really the one measure that one needs to look at.

To follow up a little bit on strategy for removing CON laws, one of the interesting areas that would be worth exploring, and I don’t know a lot about Hawaii’s self-insured state employee plans, but there are companies out there now today that are offering what are basically pre-negotiated healthcare procedures.

For a large self-insured plan, the company pretty much acts as the insurance administrator. They’re actually paying the bills themselves and using an insurance company to just sort out the claims and things like that.

These companies have a lot of claims data. They know how many heart stents they’re going to need in the year, how many knee replacements, how many rotator cuffs.

What these companies are doing is they are selling to the self-insured plans the number of procedures, and they’re doing so at a dramatic discount and offering them at surgery centers around the country that specialize in these specific procedures.

The state of Hawaii does allow for self-insured plans. I’m not really familiar with how many employees might be covered by this, but this would be something worth exploring.

If the state lawmakers would allow and make it legal for the state employee self-insured plan to actually negotiate with one of these companies to get these services provided, it would be a really important inroad because you’d have the experience of state employees knowing what it’s like to go to a high-quality facility that is really the best at what it does.

I think that would really shed a lot of light and really circumvent these CON laws a bit. That would be a really good place to start if you can’t go and remove them all at one time, for example. I think that’s definitely something to look at for future legislative sessions.

Mason: Thank you. Sal, did you want to answer that by any chance?

Nuzzo: No, I think they both nailed it. I can’t think of anything that exists now.

Like Naomi said, they may have been well-intentioned, but you’ve got to judge them based on the results, and the results just don’t add up.

Mason: Alrighty.

To Sal, a question from Micah Perry. I hope that’s Micah: “What are your views on partial CON reform, especially in states where full repeal may not be feasible, for example, reforming the certificate-of-need process, so competitors aren’t involved in the process?”

Nuzzo: This is both a necessity as an exercise to have before you go down this road, and it’s also a slippery slope that you want to make sure you avoid.

You avoid that by beginning with this discussion, and that is, what are the areas in which we are willing to compromise as a coalition, as an organization, if you’re doing lobbying as a lobbying organization? What are the areas in which we’re really willing to compromise versus what are our lines in the sand?

There’s an expression in Florida policymaking, and it’s called, “Loving a bill to death.” It’s where a bill starts out and everybody loves this bill, but they just want to change a little bit here or there. Before you know it, you’ve watered down a bill so that it has absolutely no impact whatsoever. It doesn’t reflect what your overall goal was.

Florida pursued a very robust CON repeal of everything. In the end, the legislature determined that in order to make the bill and the final reform palatable for enough people to get it to pass, we had a couple of things that were changed in it.

One was nursing homes and hospices were not included in the repeal, so there do exist CON for nursing homes and hospices, as well as ambulances. Those were just the legislative hurdles. The special interest hurdles were just too much.

We recognized that we did not want perfect to be the enemy of the good, and so that was one small area where we were like, “OK, we’re going to get all of this other stuff. These two, we can always come back, as opposed to abandoning our support for a process that then results in nothing.”

Secondly, we needed to make sure that the process didn’t become so watered down or replaced with some other regulatory scheme as to make it just CON by another name.

That was where we had very good support and very helpful support from a lot of folks who were able to read the proposals and determine where the hospital association might have wanted to insert a particular provision that would benefit the existing market players at the expense of anybody else who was trying to enter the market, just renaming it or repackaging it.

It became an everyday dive into the process itself to make sure that what we were doing, while it wasn’t a full repeal, was as close to repeal of everything as we could get.

Mason: Thank you, Sal.

This next question comes from Larry Stevens, and it is for Joe. It’s a bit technical. Here we go. “Does Hawaii have enough residency slots for its medical school graduates?”

Pluta: Does Hawaii have enough residency slots for medical school graduates?

Mason: Yes.

Pluta: Wow, that’s a good one.

In our early discussions, we were talking about when we were working on getting a certificate of need of integrating the John A. Burns School of Medicine into this whole thing together with the School of Travel Industry Management at the University of Hawaii to do health tourism, and make that a market-generated new way to be imaginative for tourism, if we could just get rid of those CON laws to encourage enough people to come here to the state and another economic resource.

I don’t have, I’m sorry, the technical answer to that question.

Nuzzo: Josh, if I could pipe in real quick on something? [crosstalk]

I don’t know the answer to that specific question, but the answer to that question could be a very good data point for you to use. I think it’s the [Associations of American Medical Colleges,” or there’s an association that collects a lot of data.

What you can determine, because we did this in Florida, is where Hawaii ranks per capita compared to other states and residency slots. You can use that data, and we did in Florida because we needed more residency slots, and one of the keys to that was building more hospitals. You can work on that as a data point — definitely something you may want to include in your research effort.

Mason: We appreciate it. Thank you so much, Sal.

Lopez: Another possible alternative reform in this particular area that’s not a direct reform, but it’s a related one, is some states have actually allowed unmatched residents to basically work in rural areas in their state to become licensed. It’s another path for licensing.

These are residents who have all the training, and they just didn’t get the match. That is one way to help alleviate some of the access issues, particularly in the rural areas or areas that are not as well served medically.

Mason: This next question was given for Sal or Naomi, and it is from Ted: “Is there anything the local or federal government can do, or is this purely a state issue?”

Nuzzo: Go ahead, Naomi.

Lopez: You start, Sal.

Nuzzo: OK. I would suggest one thing you can do is ask, I believe it’s the Federal Trade Commission, for a particular letter that they do. They have done this from, I believe, I want to say back in the George H. W. Bush administration.

The FTC will issue an advisory letter encouraging the state legislature to abandon and get rid of as many or all of the CON laws that they can.

One fun note that you can say if you’re giving testimony in a committee, which I would do often, is, and I would say, “Regardless of if you support Barack Obama, George W. Bush, George H. W. Bush, Bill Clinton or Donald Trump, every single one of those administrations has supported the legislation that you’re taking up, which is the repeal of this regulation.”

Lopez: Yes. They have been extraordinarily supportive of states’ efforts to remove the CON laws across the board.

One other thing to think about is that during COVID, there were federal flexibilities provided. One of them was basically waving the CON rules for federal programs.

What it did is for already licensed hospitals, for example, they would not have to seek a CON in order to change the number of beds, for example.

I think that what’s really important is that this is proof of concept that you can actually allow facilities to change the number of beds without having to seek permission.

That doesn’t go far enough. It’s not allowing new establishments to come into the marketplace, but at least it shows that nothing bad happens when you just leave it to the demand and the ability for the facilities to respond.

Nuzzo: Josh, if I can just piggyback on the end of Naomi’s comment because it’s very important that, as a legislator, most of them are going to be somewhat risk-averse, especially when they’re dealing with healthcare decisions and they’re not an actual medical professional, which is most legislators.

It’s important to show them the successes. One of the things we did from 2019 when the law went in place repealing and onward is we’ve collected a number of articles that talk about, in Florida, what’s going on in healthcare supply delivery.

I want to say that list is up to about 50 or 60 articles about hospitals building new transplant wings, adding MRI machines, adding hospital beds, building new ER annexes in rural communities to meet the needs of an underserved population. In almost every one of those articles, they point to either the repeal of CON laws or the regulatory reforms enacted by the Florida legislature in 2019, just to give folks an idea of where they’re going.

Seeing those real-life examples as a result of what a state like Florida did, we’re sharing that far and wide to say, “If you are interested in what can actually happen as opposed to what the hospital-industrial complex will say, which is that the sky will fall, here’s what actually happens,” and it’s great story after great story after great story.

Mason: Great. Thank you.

This is going to be our last question. I’m actually going to open it to everybody. We’ll start with Joe, then Naomi, then Sal.

The question is: “In addition to CON law reform …” — again, this is one that’s been asked by a lot of people — “would healthcare be better delivered if service providers were nonprofit as opposed to being for-profit entities?”

Joe, you go first.

Pluta: Yes. Thank you.

There seems to be a lot of difference of opinions on that. I know when we initially started out for our West Maui Hospital, it was going to be a for-profit hospital, and we’re proceeding along that way.

That was changed after the CON was approved as a for-profit hospital to a nonprofit hospital instead, and they formed a foundation. The developer deeded over the land for the hospital site to a foundation, the West Maui Hospital Foundation, and be operated as a nonprofit.

Profitability of hospitals and things like that is a real big question, but we discovered that that’s why we had a critical access hospital.

Reimbursements on critical access hospitals for Medicare and Medicaid are 101%, which guarantees a profit. That’s one of the biggest concerns of everybody is, can we be profitable?

In essence, they were losing money with Medicare and Medicaid patients but not in a critical access hospital in rural areas, so you can get reimbursed by Medicare and Medicaid 101%; that guarantees a profit.

That’s a little bit off of the answer that you were looking for. It’s hard to stop me on this once I get going on healthcare. I apologize. Thank you.

Mason: That’s all right. Naomi?

Lopez: I like to say that there are no clean hands in healthcare. The reason is that everyone is a rent-seeker. It doesn’t matter if you’re a nonprofit hospital; it doesn’t matter if you are a soccer mom who is really annoyed about paying a $25 copay, yet your Starbucks habit is about $50 a month.

We’ve really got to get away from this idea that there are good players and bad players in healthcare. There are rent-seekers. Everyone is a rent-seeker in healthcare pretty much; maybe not everyone, but most everyone.

We like to, Sal and I, in our group of healthcare policy folks around the country, we like to use what we call the Crane Index.

You can have a nonprofit hospital; how many cranes do they have up? [chuckles] They cry “Poor” constantly. They hide part of their marketing budget under charity care. They claim it’s public education, but it’s actually shiny marketing materials to provide their hospital.

I think it’s really important to not get confused about what a nonprofit hospital does and means versus a for-profit hospital. What we want to look at is allowing as many players as possible to come in and serve patients. That’s really the focus of what we need to pay attention to and talk about.

Nuzzo: I would say the challenge that I often have with profit versus nonprofit in the healthcare arena is the idea of cost transparency. You can have a more substantive debate on the role of nonprofit versus profit care when everyone is above board on what an actual procedure costs or what the pricing is, and we just don’t have that in the United States.

I think what we should be looking at is, how do we marginally get in that direction? I think there’s arguably a role to play for nonprofit versus profit in the delivery of care. I think Naomi has nailed it in terms of her response; there’s no clean hands in this.

I think what I would leave everyone with is when they want to talk about … I hear members of the left talk about there should be no profit in healthcare. it should be all nonprofit, and that’s it. [What] I say to those folks is that I have two daughters. If either of those daughters needed to have brain surgery, God forbid, if either of them needed to have brain surgery, I would want the surgeon to be a multimillionaire. I would want that surgeon to be so qualified that they command such a fee, that they make millions of dollars because they are that good at brain surgery.

That is done by a for-profit type of model. I’m not advocating that that should be the case for my primary care physician or when I go to get blood work or whatever, but there are rules to play.

I think that we’ve got a lot of work to do in this arena, but to try and simplify it down to we should only have nonprofit or we should only have profit misses the point entirely of where we’re at.

Mason: Thank you, guys, so much, and thank you, audience, for asking all these wonderful questions. I’m going to turn it back over to Keli‘i Akina.

Akina: Thank you very much, Josh, for moderating.

My gratitude goes out to Sal Nuzzo, Naomi Lopez and Joe Pluta. You did a tremendous job. We enjoy working with you on this major issue.

To all of you in the audience, thank you for being with us at the Grassroot Institute today. We really need to reform the certificate-of-need laws in Hawaii.

As we suggested earlier in a question and answer, we need to form a coalition of individuals, including professionals and citizens, as well as leaders in our government who will go to bat.

If you know of anyone, or if you’d like to be part of that, please contact us at the Grassroot Institute of Hawaii.

Until our next webinar, please go to our website and sign up for our email list so that you can receive notices and reports from us on a regular basis.

Thank you for being with us today. I’m Keli‘i Akina with the Grassroot Institute.

Aloha, everyone, and thank you to my panelists. Bye-bye.


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