Fourth Circuit Sends Virginia COPN Challenge Back to District Court for Further Fact Finding

In a decision released October 23, 2013, the United States Court of Appeals for the Fourth Circuit partially reversed a federal district court’s dismissal of a constitutional challenge to Virginia’s Certificate of Public Need (COPN) law. The Fourth Circuit panel asked the U.S. District Court for the Eastern District of Virginia to take a closer look at the law to determine if it violates the Constitution’s commerce clause by discriminating against out-of-state health care providers wishing to establish a medical service or facility in Virginia that requires a COPN.

Two businesses not based in Virginia, Colon Health Centers of America and Progressive Radiology (Colon Health), challenged Virginia’s COPN law on several grounds, including that the COPN law unduly burdened interstate commerce and therefore violated the so-called dormant commerce clause. While Colon Health conceded that Virginia’s COPN law, on its face, applies equally to businesses based in and out of Virginia, Colon Health alleged that the COPN law discriminates against out of state applicants in its purpose and practical effect. Colon Health alleged that the Virginia COPN law provides certain existing Virginia-based healthcare providers (“essential community providers”) with a government-backed shield from competition.

After the district court dismissed the dormant commerce clause claim along with other constitutional claims on the basis of pleadings only, the Fourth Circuit upheld the district court’s due process and equal protection decisions but sent the commerce clause claim back to the district court to hear evidence on whether or not there are actual discriminatory effects stemming from the COPN law on out-of-state entities. Specifically, the Fourth Circuit instructed that the lower court, in its fact-finding proceedings, investigate the differential burdens imposed on out-of-state and in-state firms subject to the COPN process.

Health care providers and facilities involved in the COPN process should continue to follow the case, as it could have significant implications for the future of the COPN law and how the Department of Health implements the law through the regulatory process.

This Client Advisory is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up to date and fact specific advice.
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