End the Healthcare CON Once and For All

 Across the country, certificate of need (CON) laws force healthcare providers to obtain permission from state regulators before they are allowed to expand current facilities, build new ones, or add new equipment. This outdated requirement is often unfairly stacked against providers seeking to expand, reducing competition and access to care services, and driving up costs for consumers.

CON laws are not about patient health and safety. “Unlike other varieties of regulation, the CON process is not supposed to assess a provider’s qualifications, safety record, or the adequacy of their facility. Instead, the entire process is geared toward second-guessing the provider’s belief that their community would benefit from the service they would like to offer,” wrote Matthew D. Mitchell in Don’t Wait for Washington: How States Can Reform Healthcare Today, published by the Paragon Health Institute. (Mitchell is a senior research fellow and director of the Equal Liberty Initiative at the Mercatus Center at George Mason University.)

ON laws have their roots in 1970s federal legislation that was designed to counter the inflationary effects of increased government spending on the cost of health services. Like many government programs, CON regulations did not deliver as promised.

“One study found that hospitals anticipated CON and actually increased their investments before it took effect,” wrote Mitchell. “Another found that while the regulation did change the composition of investments, ‘retarding expansion in bed supplies but increasing investment in new services and equipment,’ it had no effect on the total dollar volume of investment. As a result, early evaluations found that limited CON programs had no effect on total expenditures per patient, while comprehensive programs were associated with higher spending.”

In 1987, Congress did away with the federal CON mandate and 12 states eliminated their CON programs, according to Mitchell.

Despite the evidence of failure, 39 states and the District of Columbia continue to have CON laws for at least one medical service.

CON application fees range from $100 to $250,000, with some states charging a percentage of the capital expenditure, says Mitchell. “There is no systematic data on compliance costs, but we know that providers can spend months or years preparing their applications and waiting to hear from the regulator,” he wrote. “Because the process can be cumbersome, providers often hire boutique consulting firms to help them navigate it.”

In addition to compliance costs and revenue losses during the application process, the deck can be stacked against applicants, as the decision-makers are often employees of existing healthcare providers whose businesses could be impacted by new competition if CON applications were to be approved.

Healthcare providers wishing to expand services are not the only ones suffering under CON. So too are consumers being denied the benefits of competition in the healthcare market. With CON laws, power is in the hands of government regulators and special interests. Without CON laws and the health services monopolies they foster, healthcare providers would be forced to compete for consumers, offering better, more convenient, and more affordable care.

In some states, for example, care options for expectant mothers are restricted by CON laws that limit the supply of freestanding birthing centers that are usually non-profits or small businesses run by midwives that are unable to afford the costs and other regulatory requirements. New York Gov. Kathy Hochul recently signed legislation that is expected to remove obstacles to clear the way for midwife-run birth centers.

The COVID-19 pandemic has forced states to look for ways to better deliver and ensure healthcare services—and sacred cows such as CON have come under scrutiny.  In fact, as of January 2021, 24 states have eased CON requirements, giving healthcare providers greater flexibility to respond to the crisis.

CON reforms were necessary to respond to the COVID crisis. But reforms to eliminate these absurd policies were also necessary before COVID. Governors and state legislators should act to get rid of them once and for all. Consumers in every state deserve a healthcare market that competes for their business and seeks new ways to provide wide-ranging, innovative services at lower costs. Getting rid of archaic CON laws – and proving to the healthcare crony-cartel that the market is changing- will help create that market.

Dr. G. Keith Smith is a board certified anesthesiologist and co-founder of The Surgery Center of Oklahoma.

https://www.realclearhealth.com/articles/2022/01/19/end_the_healthcare_con_once_and_for_all_111297.html