Supreme Court of Georgia Upholds Constitutionality of Certificate of Need Statute

Miller & Martin PLLC Alerts | December 05, 2017

by Rebecca Thornhill

The Supreme Court of Georgia has rejected an outpatient surgery center’s constitutional challenge to the state’s Certificate of Need (“CON”) statute, Women’s Surgical Center, LLC, v. Berry. The applicable code section, O.C.G.A. § 31-6-40(a)(7)(c), requires a healthcare provider to obtain a CON prior to offering new healthcare services, such as ambulatory surgery. Women’s Surgical Center in Cartersville, Georgia contended that it should be permitted to add a second operating room to its premises without obtaining a CON.

The Court’s Analysis

The Center argued that the CON statute violates both the Anti-Competitive Contracts clause of the Georgia Constitution and the due process clauses of the Georgia and U.S. Constitutions.

1.  The Court held that the Anti-Competitive Contracts clause was inapplicable.

  • This clause makes unlawful contracts and agreements that have the effect of encouraging a monopoly.
  • The CON statute does not authorize monopolistic healthcare contracts; the statute only requires that providers obtain a CON prior to adding new healthcare services.

2.  The Court held that the CON statute did not run afoul of the Center’s due process rights.

  • Because the statute does not involve a fundamental right or affect a suspect class of people, the court applied the “rational basis test,” requiring that a law has a reasonable relation to a proper legislative purpose.
  • Noting that “promoting the availability of quality healthcare services is certainly a legitimate legislative purpose,” the court held that the statute passed rational-basis scrutiny.

What Does It Mean for Healthcare Providers?

1.  This is a case about the General Assembly’s ability to regulate healthcare.

  • The court noted that “there are few (if any) private sector markets so dominated by government regulation.” 
  • Though the court’s ruling was limited to the constitutionality of O.C.G.A. § 31-6-40(a)(7)(c), the court’s analysis could be applied to the entire CON statutory scheme.
  • In other words, providers may face an uphill battle in future challenges to the law.

2.  The Court’s opinion has limited applicability outside of the healthcare sector.

  • The Court explicitly recognized that the healthcare sector is unique because it is so highly regulated, noting that the decision should not to be read to support “sweeping economic regulation” outside of the healthcare space.
  • While the court’s ruling stands as important precedent for the constitutionality of the CON review and approval process, the opinion has limited applicability to other forms of economic regulation.

For questions regarding Georgia and Tennessee CON requirements, contact Rebecca Thornhill in the firm’s Healthcare group.

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