Lawsuit: ‘Big Sharks’ Keeping ‘Small Fish’ Out of Home Health Market with Certificate of Need Laws

Two Nepalese immigrants who were barred from opening a home health agency due to Kentucky’s certificate of need law are now taking on the state in a lawsuit.

Business partners Dipendra Tiwari and Kishor Sapkota had plans to open a home health agency that served the Bhutanese refugee population in the Louisville area. The idea behind their business was to provide home health services with nurses and caregivers who understand the language and culture of their potential clients.

In the past, in-home providers have marketed their services to older adults at large, but over the years the industry has seen the establishment of more targeted businesses that offer care tailored to address the needs of specific communities.

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“We simply want to start a home health agency that offers health care in the first language of thousands of Kentuckians,” Tiwari said in a statement from the Institute for Justice, an Arlington County, Virginia-based nonprofit libertarian public interest law firm. “Yet because of Kentucky’s certificate of need law, the big sharks can keep the small fish out of the market.”

Under current state law, a certificate of need is required to open a home health agency, placing a limit on the number of health agencies in a county. In order to open a business, an agency has to prove that at least 250 patients need its services.

Mississippi, New York and Vermont also have certificate of need laws for home health agencies.

With the Institute for Justice, Tiwari and Sapkota have filed a lawsuit against the Kentucky Cabinet for Health and Family Services, in part alleging that the law is unconstitutional because it helps to create monopolies out of existing operators.

“Certificate of need laws unconstitutionally prevent new businesses from competing with established ones, while harming patients,” Jaimie Cavanaugh, an attorney at the Institute for Justice, said in a press release. “Government shouldn’t be in the business of picking winners and losers.”

In general, Kentucky’s certificate of need law brings to mind states such as Florida, Illinois, Michigan and Texas, which have seen similar moratoria laws enacted on a statewide basis — usually in an attempt from the federal Centers for Medicare and Medicaid Services (CMS) to curb fraud.

As of now, CMS’s moratoria on new Medicare home health agencies is no longer in effect in the U.S., with the federal agency looking to measures such as Review Choice Demonstration (RCD) to address fraud.

In the past, industry views on CMS’s moratoria have been a mixed bag.

“As agencies closed, there was no ability to establish new agencies to replace them,” Sara Ratcliffe, executive director of the Illinois HomeCare & Hospice Council, previously told Home Health Care News. “The moratoria also impeded the ability of Medicare-certified agencies from enrolling in the State’s Medicaid program, which presented an access issue for this population, especially coupled with managed care roll-out in the state.”

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