Pubdate: Fri, 23 Jun 2017
Source: Press-Enterprise (Riverside, CA)
Copyright: 2017 The Press-Enterprise Company
Author: Teri Sforza


When it comes to drug and alcohol rehab centers, California channels its 
inner Texas: few burdens on business and as free-market as possible.

That stands in sharp contrast to New York, Massachusetts and a dozen
other states, where would-be rehab operators must prove there's a
local demand for their services and obtain a "certificate of need"
before snipping opening-day ribbons and scaling those legendary 12

The lack of such a system is a key reason why Southern California is
known as Rehab Riviera, with far more centers than the region's
population could possibly support, critics say.

These CONs, as they're called, may sound wonky -- but they've been
part of the American health care landscape for decades and aim to
protect businesses as well as consumers.

"The basic assumption underlying CON regulation is that excess
capacity stemming from overbuilding of health care facilities results
in health care price inflation," said a review by National Conference
of State Legislatures in 2016. "Price inflation can occur when a
hospital cannot fill its beds and fixed costs must be met through
higher charges for the beds that are used....

"Mandatory regulation through health planning agencies determined the
most urgent health care needs, contributed to solutions for these
needs and attempted to manage the fluctuations in prices often found
in a competitive market. The intent was that new or improved
facilities or equipment would be approved based primarily on a
community's genuine need. Once need was established, the applicant
organization was granted permission to begin a project."

As residents from Lake Arrowhead to Costa Mesa, Murrieta to Malibu and
Palm Springs to San Clemente know all-too-well, that's not how it
works in California. These cities have some of the densest
concentrations of drug and alcohol treatment centers in the nation --
far more than their local populations could ever require, residents
say -- and the influx of outsiders gravely impacts their communities,
they say.

Malibu has 47 licensed centers, the same number as the entire state of
Rhode Island. Costa Mesa has 102 licensed centers, more than the
states of Mississippi, Nevada, Alaska, Arkansas and Montana, according
to state and federal data.

How did this hyper-concentration happen? Some trace it back to the
1980s, when California dumped CON requirements in a Reagan-inspired
flush of deregulation. Today, California stands with Texas, North and
South Dakota, Kansas, Idaho, Wyoming, Utah and New Hampshire -- the
"Live Free or Die" state -- in unleashing the health care industry to
market forces and allowing would-be operators to largely open what
they want, where they want, regardless of local need.

Some argue it hasn't worked out well in California.

"It's so bad right now I get three to four calls a month from people
who tell me they want to open up a ‘detox center' and can I help
them," said Mick Meagher, an Escondido-based attorney and consultant
to the addiction treatment industry.

"Most are target-marketing young adults from out-of-state who are
relying heavily on mommy and daddy's PPO insurance. But there's no
showing of need. Show me that Newport Beach and San Clemente need 44
more treatment centers based on their catchment area.

"Telling me (that) there are 80,000 guys in Florida or Texas or Kansas
who need treatment should not, in my mind, be satisfactory," Meagher
added. "They may need it, but not here."

The Southern California News Group recently investigated the addiction
industry and found it peppered with financial abuses that bleed untold
millions from public and private pockets, can upend neighborhoods, and
often fails to set addicts on a path to sobriety. Lax government
regulation and widely-divergent treatment approaches have meant poor
care for many. The revolving door between detox centers, treatment
facilities, sober living homes and, often, the streets generates huge
money for operators who know how to game the system. And even obvious
fixes can be hard to make.

California's regulation of substance abuse treatment been attacked for
myriad failings over the years. But the state's move to drop the CON
requirement might be macro event that allowed the rest to happen.

New York was the first state to adopt a CON law -- for nursing homes
- -- back in 1964, according to a review by the California Research
Bureau. It's no easy feat to get such permission in New York, and that
keeps the lid on growth, which is either agonizing or excellent,
depending on one's point-of-view.

New York's system is typical of CON states: First, would-be facilities
must submit an application, which goes through a "public need review"
to ensure that the services it plans to provide are in demand from the
local community. Then there's a financial feasibility review; a
"character, competence and programmatic review;" an architectural and
engineering review; and finally, a legal review.

Instructions run dozens of pages long and require applicants to
address an exhaustive list of questions in what may be the healthcare
equivalent of California's Environmental Impact Report. (EIRs, widely
detested in the construction industry, require many builders to
complete exhaustive and expensive examinations of a project's effects
before they're allowed to displace a shovelful of dirt.)

Staffers at the New York State Department of Health make a
recommendation on whether the facility can open, and the final
decision is made by the New York State Public Health and Planning
Council in a public session.

Today, New York treats more patients than California, even though it
has about half as many licensed treatment facilities, according to
state and federal data.

Massachusetts is another state with a reputation as a watchful
regulator. It revamped its system -- referred to as "Determination of
Need," or DON -- in March.

Among many other things, would-be providers must complete a "patient
panel" with supporting data to demonstrate the need for the project,
including disease burden, behavioral risk factors, health disparities
and other objective measures. They must show that their projects will
result in improved health care outcomes in Massachusetts, and provide
evidence that the projects "will compete on the basis of price, total
medical expenses, provider costs, and other recognized measures of
health care spending."

In 2015, Massachusetts had 321 substance abuse treatment centers and
45,438 clients in treatment, according to SAMHSA.

States with CON or CON-like laws governing substance abuse treatment
centers include Alabama, Connecticut, Hawaii, Maine, Mississippi,
Montana, North Carolina, Oklahoma, Rhode Island, South Carolina and
Tennessee, as well as Washington D.C., said Ashley A. Noble, a policy
specialist with the nonpartisan National Conference of State

"CON is usually implemented to control costs, supply, or both," Noble

"The evidence is not consistent on whether it controls cost," she
added. "But it appears to work well if you're trying to control supply."

The CON concept has a long and tortured history in

The state's first CON program was enacted in 1969 and was required for
the placement of acute general hospitals, skilled nursing facilities,
acute psychiatric hospitals, intermediate care facilities, and for the
conversion of existing hospital beds to a different type of service.

"For more than 30 years, state and local planning agencies were
involved in analyzing and approving the construction and expansion of
health care facilities and services, based on a determination of
community need," said a 2006 State Research Bureau report. "The goals
were to ensure access to quality health care and to contain costs by
restricting excess hospital capacity."

 From 1970 to 1973, about 14,000 additional beds for California health
facilities were approved for a CON, and nearly 15,000 were denied. If
facilities opened without a CON, Medi-Cal payments could be withheld.

But that rarely happened. The Research Bureau said California's CON
program in that era suffered from inadequate staffing, a lack of data,
exceptions that made it difficult to administer, and sanctions for
noncompliance that were hardly ever used.

Several studies challenged the basic assumption inherent in CON laws;
that restricting the supply of health care facilities reduces health
care costs. In fact, they contended, it increased costs by restricting

But CON supporters pointed to competing studies that found regulation
exerts a downward pressure on spending and health care costs,
compensating for imperfections in the market and promoting access to
quality care, especially in rural areas.

Debate became largely moot after President Reagan's Omnibus Budget
Reconciliation Act of 1981, which substantially reduced federal
funding for the planning of health care facilities. Reagan's budget
requests proposed repealing CON nationwide, as a way to "reduce the
regulatory burden on the private sector." Soon a number of
states-including California -- ditched the requirements," the Research
Bureau said.

What now?

The Federal Trade Commission and Department of Justice said that "CON
programs are not successful in containing health care costs and pose
serious anti-competitive risks that outweigh their purported economic
benefit" in a 2004 review.

A review during the same time period for several huge employers -- car
makers DaimlerChrysler Corporation, Ford Motor Company and General
Motors -- found that CON states had lower health care costs than
non-CON states.

As a new anti-regulation mood sweeps the nation, more states are
reconsidering CONs. Florida -- a state that matches California in the
scope of fraud within its addiction treatment sector -- may abandon
CONs as well. The move wouldn't have much impact on rehabs, though:
addiction treatment facilities aren't subject to CON requirements in

Some wonder if California should reconsider a 21st century version of
CON, requiring proof of local need before facilities can open.

"Of course we should have licensed treatment centers in proportion to
the local need -- that's eminently logical," said Laurie Girand, a
steering committee member with Advocates for Responsible Treatment in
San Juan Capistrano.

Her city has 35,000 citizens and 29 state-licensed facilities --
nearly as many as Washington, D.C. Fourteen of them are detox houses,
where addicts might stay for days or weeks, and 15 are treatment
centers, where they might get therapy for months.

"The local population does not need that many treatment centers,"
Girand said.

For one miserable year, Geoff Szabo lived next to a rehab in

"This has legs for limiting the number of facilities," Szabo said of
CONs. "Part of the problem we have in Murrieta with these 15 or so
rehabs is that the vast majority of people are flown in from out of
state. There's something to be said for getting the addict out of the
environment -- but I don't know that they have to go a few thousand
miles. A few cities away might be fine."

Constance Scharff is director of addiction research with Cliffside
Malibu, a luxury rehab frequented by celebrities. She's not so sure
CON is the answer.

"I think it's unfair to let homeowners dictate and decide where other
people can get their health care needs met," said Scharff. "People say
‘we don't want these facilities in our neighborhood,' so often,
even if there's a need, you wouldn't get a certificate."

Predicating substance abuse treatment licensing on local demand
ignores a basic reality, she said: If one is going to endure the
extreme physical discomfort of trying to get clean, one would rather
do it by the seashore.

"If you're given the choice between Huntington Beach and Hesperia,
what are you going to chose?" Scharff asked. "Clearly, as a society,
we have to do something. The status quo is not acceptable.

"The treatment centers and the community really need to be on the same
side," she said. "Every community has this problem of addiction. It's
your children. Your parents. Your husbands and wives. We have to come
to a consensus that says, "what are we going to do to help these
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