How Florida’s 2019 law catalyzed a hospital construction boom

WESLEY CHAPEL, Fla. — In BayCare Hospital Wesley Chapel’s 86 private rooms, patients can use voice-activated Alexa devices to dim lights, play music or call for a nurse.

BayCare boasts the latest high-tech equipment. However, the company says its $246 million facility, which opened here in March, does not provide any health care services beyond what patients could receive at a hospital just 2 miles away.

BayCare Wesley Chapel’s shine as the newest hospital in this fast-growing Tampa suburb of 65,000 will not last. Another general hospital is down the road, a third a five minute drive.

“It’s kind of crazy,” said Pat Firestone, who works at Macy’s in the upscale shopping area near the hospitals. “It’s good to know there’s a hospital nearby, but I’m not sure all this is necessary, especially when there are no hospitals in other areas.”

Wesley Chapel is just one scene of a hospital building boom in Florida that was unleashed nearly four years ago when the state waived the requirement for companies to get government approval to open new hospitals.

Florida is among the states that have scrapped a decades-old regulation designed to keep medical costs in check. Until the 1980s, a nearly nationwide requirement allowed a new hospital to be built only if the state issued a “Certificate of Need,” or CON. The process involves hospital developers applying to the state and provincial government, assessing needs based on criteria such as population growth and existing hospital capacity.

About two-thirds of states still require CON. But several, including Georgia, Kentucky and South Carolina, have considered repealing or easing restrictions this year. West Virginia loosened its rules in March.

Critics of the CON process say it stifles competition and limits access to care. But the hospital industry often defends the process, which protects facilities from potential competitors.

In most industries, competition drives down prices, but more hospital beds and services can actually increase the cost of patient care because of the pressure to recoup all that input, which spreads through the system.

When there is excess medical capacity, doctors can overprescribe, such as ordering an expensive CT scan instead of a cheaper X-ray, said Steve Ullman, a professor of health policy at the University of Miami.

“All that construction has to be paid for somehow,” said Alan Baumgarten, a Minnesota-based consultant who analyzes health care markets.

Competition can also increase labor costs, which contributes to health costs.

Meanwhile, more hospitals may leave medical teams at any hospital that performs less complex procedures and lower quality, some experts say.

Furthermore, as Wesley Chapel demonstrates, new construction does not necessarily contribute to areas that need it. Hospitals tend to follow the money to relatively affluent markets rather than underserved rural or urban communities.

While dozens of new hospitals are planned in Florida, none are going up between Jacksonville and Pensacola, more than 300 miles of rural areas spanning two time zones.

Republican Gov. Ron DeSantis signed a law that would eliminate Florida’s approval process in 2019. Companies announced plans to build at least 65 hospitals in Florida between 2020 and 2022, according to state data. Most are located in South Florida, the Tampa area, and the Orlando area.

In contrast, between 2016 and 2018, the state approved just 20 new hospitals. There are a total of about 320 hospitals in Florida.

Those numbers include not only general “acute care” hospitals, but also inpatient facilities that specialize in rehabilitation, psychiatric care and emergency medicine, among others.

The Pasco County School System, where Wesley Chapel is located, welcomed the new construction. Mary Martin, who oversees the school’s employee benefits, expects it will cut wait times and give patients more options while strengthening health plans’ hands in price negotiations with hospitals.

“This is a big win for our employees,” Martin said.

However, health professionals say residents could be stuck with higher health care bills.

“Having so many hospitals is inflationary,” said Linda Quick, former president of the South Florida Hospital and Healthcare Association.

“If you don’t have enough people using it, the fixed costs have to be offset by the number of people using it,” Quick said.

Patients tend to go where insurers allow and where doctors send them instead of shopping around and comparing prices. When the insurer pays the bill, the patient may not pay the cost.

Insurers pass costs on to patients by raising premiums and deductibles and limiting coverage, for example by requiring members to use narrow provider networks, Ullman said.

In South Carolina, the legislature has debated its kill-or-reform CON regulation for years. A state report last year highlighted the high costs and long delays that hospital companies face in obtaining state approval. In September 2022, the hospital opened at Fort Mill, outside of Charlotte, North Carolina, more than 15 years after it was proposed.

Before the Fort Mill hospital opened last year, residents often drove 45 minutes for care, according to Fort Mill Mayor Guy Savage.

A shorter vehicle will help in emergencies, Savage said.

The South Carolina Senate passed a bill in February that would essentially repeal the CON requirement, but the bill faces an uncertain future in the House.

While South Carolina hospitals favor some loosening of the regulations, they oppose a complete repeal.

That angers Sen. Larry Grooms of South Carolina, a Republican who is pushing for a full repeal.

Hospital leaders favor keeping the law to protect “their own turf,” Grooms said. “That’s not how capitalism works. That’s not how free markets work.”

The Florida Hospital Association fought to repeal the new hospital regulation, but acquiesced when it no longer had the votes in an increasingly conservative legislature.

Today, Florida hospital officials say they are simply expanding to keep up with the growing population.

However, hospitals also seek to grow in markets that can generate the highest profits. They tend to avoid buildings where many people are uninsured or on Medicaid, the state health insurance program for low-income people.

In addition, hospital systems are trying to expand their geographic footprint, which gives them greater leverage in negotiating reimbursement rates with private insurers. The increased bargaining power of hospital systems could lead to higher premiums for consumers, said Baumgarten, a Minnesota-based consultant.

BayCare, which owns 15 other hospitals in the Tampa Bay area and Central Florida, opposed efforts to repeal Florida’s regulation, worried that ending it would allow competing hospitals to enter BayCare’s territory and drive away its highest-paying patients and few staff, Carey said. : Eisenbeis, senior vice president of corporate affairs for BayCare.

The company, based in Clearwater, Florida, bought the Wesley Chapel property in 2006. It applied to build a hospital here in 2012, but was denied when the state approved a competing bid from Adventist Health System, a hospital chain now called AdventHealth.

A photo of the hospital with the AdventHealth logo.
Until March, AdventHealth Wesley Chapel was the only hospital in the Florida community. Soon it will have two rivals in suburban Tampa, all within a five-minute drive of each other.(Phil Galevitz/KFF Health News)

BayCare reapplied in 2018 and the state approved. But AdventHealth appealed the decision, and the appeal threatened to keep the matter in court for years. When the state repealed its CON requirements in 2019, BayCare moved forward with its original plan.

Additionally, in 2022, Orlando Health revealed plans to build a 300-bed hospital at Wesley Chapel. Construction has yet to begin. And PAM Health announced plans to build a rehabilitation hospital at Wesley Chapel in January this year.

Rebecca Shulkowski, president of BayCare Wesley Chapel, predicts BayCare’s patient rooms will fill up quickly, given the number of young families and retirees moving into the new apartment buildings.

One big challenge Shulkowski faces is hiring enough staff. That includes luring doctors and other healthcare providers to the city, rather than simply hiring employees from rival AdventHealth.

Although BayCare argued the city needed more hospital beds, AdventHealth’s Wesley Chapel Hospital often had many empty beds. According to the most recent annual data released by the state, its employment rate in 2021 was 66%.

Even with the state’s growing population, “none of these communities lack inpatient care,” Quick said, referring to suburban areas like Wesley Chapel. “What we have is a lack of sick people.”

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