MedStar deftly uses regulatory process to block competitors

MedStar Health has shored up its position as the District’s market-leading health provider, beating back competitors with a lot of help from the D.C. government.

How it all came together isn’t a story of malfeasance or even necessarily bad laws, but rather a case study of how “certificate of need” regulations can function as much to protect entrenched interests as they do consumers.

On May 31, District health regulators issued three major decisions on requests for permission to launch new medical programs, as the law has required for decades. Through savvy and aggressive use of the process, MedStar got nearly everything it wanted.

MedStar officials declined to comment.

Only one decision dealt directly with MedStar business: MedStar Georgetown University Hospital was cleared to spend $32 million to become the city’s first provider of proton-beam therapy for cancer treatment.

But Columbia, Md.-based MedStar had a lot of success blocking plans from other hospitals.

In one, the city blocked half of Sibley Memorial Hospital’s plans for a much larger, $129.9 million version of the same proton therapy for cancer. Relying in part on MedStar’s opposing filings in the case, D.C. State Health Planning and Development Director Amha Selassie agreed that only half of Sibley’s proposal isneeded. That severely undercuts the Sibley project’s financial viability and throws a kink into owner Johns Hopkins Medicine’s long-stated plans to make Sibley a cancer destination and compete with Georgetown.

In another case, Selassie blocked George Washington University Hospital from performing kidney transplants, a business currently controlled by MedStar. Two community panels sided with GW before Selassie wrote an opinion essentially endorsing MedStar’s argument that new competition would be unnecessary.

Let’s be clear: There’s zero evidence that MedStar has secured any special consideration from Selassie, and his decisions in the past haven’t always pleased MedStar. But MedStar’s expertise and deep resources put it in a position to have a major say on whether its competitors get to take a run at their business. (All decisions are subject to appeal.)

This regulatory regime exists because of the mantra we’ve heard before: Health care is different, and a heavier-than-usual regulatory hand is fair, if for no other reason than that most of the revenue comes from taxpayers.

So-called “gold plating” of hospitals shouldn’t come at our expense. But as MedStar proved this May, what the law sees as unnecessary spending is sometimes more commonly understood as competition.


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