Ninth Circuit Rules That State Certificate of Need Laws May Unconstitutionally Burden Interstate Commerce - Yakima Valley Memorial Hospital V. Washington State Department of Health1

Article excerpt

Ninth Circuit Rules that State Certificate of Need Laws May Unconstitutionally Burden Interstate Commerce - Yakima Valley Memorial Hospital v. Washington State Department ofHealthx - The United States Court of Appeals for the Ninth Circuit recently held that Washington State Department of Health's ("Department") certificate of need ("CON") regulations, which restrict the number of hospitals performing elective percutaneous coronary interventions (PCIs),2 may be unconstitutional as an unreasonable burden on interstate commerce.3

Yakima Valley Memorial Hospital ("Memorial"), the plaintiff, operates a nonprofit hospital in Yakima, Washington.4 Memorial currently performs PCIs, procedures used to treat diseased arteries of the heart, only in emergency situations.5 Additionally, Memorial seeks to perform elective PCIs.6 Memorial, however, must be licensed under Washington's CON regulations before offering elective PCIs to patients.7 CON regulations require that a hospital applying for a PCI license must: (1) perform a minimum of 300 PCIs per year, and (2) demonstrate that the projected demand in the applicant's geographic market exceeds the number of PCIs currently provided by licensed incumbent hospitals by at least 300 PCIs.8 Memorial cannot meet these requirements for a PCI license because Yakima Regional Medical and Cardiac Center, a licensed hospital, already serves the local market.9 According to these requirements, the market will not "need" another hospital to provide elective PCIs until the year 2022.10

Memorial sued the Department in the United States District Court for the Eastern District of Washington." Memorial alleged that the Department's requirements under the CON regulations were anticompetitive and violated section 1 of the Sherman Act because they allowed incumbent license holders to maintain their PCI monopoly.12 Further, Memorial argued that the CON regulations placed an unreasonable burden on interstate commerce by preventing Memorial from participating in the interstate market for PCI patients, which violates the "dormant" Commerce Clause.13

The district court held that the CON regulations did not violate the Sherman Act because these regulations were unilateral restraints on trade rather than hybrid restraints.14 Unilateral restraints are imposed directly by the states and are thus immune to antitrust challenges.15 In contrast, hybrid restraints do not enjoy the same immunity because they delegate the regulatory power to private parties.16 Because restraints on trade imposed directly by states are immune from antitrust challenges, unilateral CON restraints do not violate the Sherman Act.17 Moreover, the district court found that the Department did not violate the dormant Commerce Clause, although Memorial had standing to bring a Commerce Clause claim.18 The court noted that Congress expressly authorized CONs under the National Health Planning and Resource Development Act (NHPRDA), which required states receiving federal funding to devise programs that prevented unnecessary healthcare services and facilities from being offered to patients.19 Thus, the court held that this federal statute provided the authorization necessary for CON regulations to survive the dormant Commerce Clause challenge.20

Memorial appealed the district court's decision that the state's CON regulations did not violate the Sherman Act and that NHPRDA authorized these regulations.21 In response, the Department cross-appealed the decision that Memorial had standing to bring a claim under the dormant Commerce Clause.22

On appeal, the Ninth Circuit affirmed that Washington's CON regulations did not violate the Sherman Act and that Memorial had standing to bring a claim under the dormant Commerce Clause.23 First, with regard to the alleged violation of the Sherman Act, the court found that the regulations did not grant hospitals the power to dictate the restraint on trade.24 Rather, the state had already established the parameters of the restraint on trade at the time it enacted the CON regulations. …