Opinion ID: 223637
Heading Depth: 3
Heading Rank: 2

Heading: The PCI Regulations Impose a Barrier to Entry

Text: The Washington legislature ordered the Department to promulgate a certificate of need requirement for elective PCI addressing, at a minimum, factors related to access to care, patient safety, quality outcomes, costs, and the stability of Washington's cardiac care delivery system and of existing cardiac care providers. Wash. Rev.Code § 70.38.128 (2007). In response, the Department promulgated regulations setting forth a variety of requirements for an elective PCI certificate of need. See Wash. Admin. Code §§ 246-310-700-755. Memorial challenges only the PCI regulations' methodology for calculating a community's need for an additional elective PCI provider. See Wash. Admin. Code § 246-310-745. As is apparent from the regulations, once the Department grants a hospital a certificate of need to perform elective PCI, the requirement that there be an unmet demand for 300 procedures before granting another certificate of need creates a barrier to entry for potential competing hospitals. The Department calculates need based on dividing the state into 14 geographical markets (planning areas). See id. §§ 246-310-705(5), -745(10). A hospital applies for a certificate of need to serve a particular planning area. The Department then forecasts whether the planning area will have unmet demand for elective PCI procedures within five years. See id. § 246-310-745(10) (explaining a five-step numeric methodology). A planning area needs another provider of elective PCI only if projected demand exceeds current capacity by 300 procedures. See id. (Steps 4-5). [11] Projected demand is based on the planning area's current use rate (procedures per 1,000 residents) in the base year and the planning area's estimated population in the forecast year, five years into the future. Id. §§ 246-310-745(1), (3), (5) & (10) (Steps 1-2). Assuming a constant use rate, the Department projects demand in the forecast year. That is, the projected demand is the current use rate multiplied by the forecasted population. If the projected demand sufficiently exceeds the planning area's current capacity, the Department will issue a certificate of need. Current capacity is based on the volume of procedures performed by the planning area's existing certified PCI providers in the base year. The planning area's current capacity is assumed to remain constant over the forecast period. Id. § 246-310-745(10) (Step 3). The Department calculates the planning area's net need for an additional provider by subtracting the current capacity from the projected demand. See id. (Step 4). If the difference exceeds 300 procedures, the Department will issue one certificate of need for every 300 excess procedures. That is, if there is excess demand from 301 to 599 procedures, the Department will issue only a single additional certificate of need. Similarly, if there is excess demand up to 299 procedures, the Department will not issue any new certificates. See id. (Step 5). The regulations' limitation on when hospitals may offer elective PCI procedures serves as a barrier to market entry for hospitals who, but for the certificate of need requirement, would begin offering elective PCI procedures and competing for those patients.