By Susan Levine and Eric M. Weiss
Washington Post Staff Writers
Sunday, January 15, 2006

The plan by Mayor Anthony A. Williams and Howard University officials to exempt a proposed $400 million hospital from the city's usual regulatory review is not permitted by the federal mortgage insurance program that is critical to half of the project's financing.

The university expects to pay for most of its share of the National Capital Medical Center's cost, as much as $212 million, through tax-exempt revenue bonds backed by the Federal Housing Administration. The mortgage insurance would help Howard obtain a lower interest rate on its borrowing.

But the FHA's "minimum eligibility requirements" will not allow the hospital to move ahead as Williams (D) and the university would like -- by bypassing the "certificate of need" process that is intended to encourage accountability within health care and to discourage unnecessary duplication of services.

The District and 26 states mandate such evaluation of major medical construction, expansion or modernization, and the FHA considers it "a fundamental element of the FHA review process," spokesman Lemar Wooley noted Friday. Asked whether officials ever have allowed a certificate-of-need state to excuse a large project from that scrutiny, he responded with one word: "No."

His characterization contradicted the city's latest argument that the stipulation is a perfunctory detail -- or, as a senior policy adviser to City Administrator Robert C. Bobb put it, "basically just a check-box to ensure that all local requirements have been met before they hand out a credit enhancement."

The adviser, Gina Lagomarsino, said the Williams administration believes that a D.C. Council vote exempting the medical center would mean the District essentially has no local certificate-of-need requirement in this instance. Howard and its financial consultant have assured them for months that the approach would comply with FHA rules, and "based on our reading of the law," city officials concurred, she said.

So 10 days ago, when the partners signed a long-awaited agreement on the complex, the mayor announced that he would ask the council to approve a waiver. Doing so, supporters say, would help accelerate the timeline and circumvent any opponents intent on lengthy delays. In fact, the agreement makes Howard's "obligation to proceed" contingent on the council's acquiescence.

The FHA's general counsel is reviewing the situation, according to Lagomarsino.

The issue could be a real complication for the joint venture, which is planned for the grounds of the former D.C. General Hospital in Southeast Washington. Although the District and Howard would split construction costs for the 250-bed facility, the university alone would be responsible for its first three years of operation. Starting in the fourth year, any operating deficits would be covered by a new nonprofit corporation that would run the medical center and Howard's existing hospital on Georgia Avenue NW.

Although some communities on the city's eastern side endorse the project because it would bring trauma care and hospital beds to areas where they are lacking, others in the city -- including the District of Columbia Hospital Association -- question the assumptions justifying its planned size and services as well as the impact it could have on the entire medical system. They predict it would face tough going on a certificate of need.

In a statement Friday, the university said it will comply with "everything that [FHA officials] deem appropriate." Howard suggested for the first time that because the future facility's beds would come from Howard University Hospital's licensed total, the certificate of need already in effect there could apply to the new site.

The statement concluded: "If the Council fails to approve any requirement needed for FHA approval, obviously the NCMC will not go forward." It did not address the possibility of Howard seeking other kinds of financing for its share of construction.

Council members had various reactions to the issue and its potential ramifications.

"At the end of the day, it all comes down to legal interpretations," said council member Vincent B. Orange Sr. (D), who embraces the bed-count argument. "If Howard already has a certificate of need [for 482 beds], there's no reason for them to get two."

The Ward 5 representative and mayoral candidate also took a slap at colleagues who voted in 2001 to keep D.C. General open but are against its proposed successor. "A lot of these people are dancing to the tunes of the political winds," he said. "One day they say they're for the hospital; the next day, they're not. That's not real leadership."

Vincent C. Gray (D-Ward 7), perhaps the biggest booster on the council, said he was unaware of the FHA provision until Friday. Still, he said, the certificate-of-need process is run by the District: "Therefore, if the legislative body chooses to waive it, does it supersede the requirement? That is the question.

"I continue to believe there is a need for this hospital," said Gray, whose constituents would be some of its greatest beneficiaries. "These beds already are in existence. We are moving them from Georgia Avenue to Reservation 13."

Council member Sharon Ambrose (D-Ward 6), who represents the district where the National Capital Medical Center would be built, remains "absolutely opposed" to waiving the certificate of need. "I stand in the same place as I started," she said.

The chairman of the council's health committee, often highly skeptical of the project, was scathing in his comments. "The language of the law is unambiguous," said David A. Catania (I-At Large). "If you have a CON process, it must be followed. . . . Through some clear sleight of hand we can't pretend we don't."

Since the FHA program began in 1968, it has insured more than 300 hospital mortgages with value topping $10 billion. If approved, Howard's would be one of the largest ever. Since August 2003, Wooley said, only eight hospital mortgages of more than $100 million have received federal backing.