Certificate-of-need (CON) laws are still implemented in 35 states and the District of Columbia, interfering in the health care marketplace, according to a Mercatus Center at George Mason University study.
Federally mandated in 1974, CON laws were intended to prevent health care providers from making unnecessary expenditures that would result in higher medical costs for patients. In reality, CON laws have stifled the free-market system and created a barrier to entry for non-hospital health care facilities. CON laws require medical providers to seek permission from state bureaucrats to offer new services, expand facilities, or invest in technology. As a result, quality declines while costs increase. These laws particularly affect rural hospitals and hurt poor, underserved communities the most, according to the study.
Although Congress repealed its CON mandate in 1986, it lives on in many states. In some cases, that means setting numerical caps on certain services such as the total number of beds in hospitals and nursing homes. In other states, a CON is required for ambulance services.
Pandemic Proves Strain
The COVID-19 pandemic may have finally begun to alter the status quo. As the pandemic placed a strain on health care services and supplies, state policymakers saw the downsides of a law that limits the availability of health equipment and innovation.
“It’s hard to know how big of a factor the pandemic played in policymaker thinking, but it does seem that efforts to eliminate or reform CON have picked up this year,” Matthew D. Mitchell, a senior research fellow at Mercatus and author of the report, told Health Care News. “CON repeal or reform bills were introduced in 12 states.”
In 2021, significant reform or repeal bills were initiated in six states—Alaska, Missouri, North Carolina, Oklahoma, South Carolina, and West Virginia. Mitchell says the momentum seems to suggest that major changes are on their way in the next few years. Tennessee and Washington passed reforms that may eventually lead to full repeal. Montana saw the most dramatic reforms of all the states in recent years, eliminated every CON but one—nursing home care. According to Mitchell, Montana’s reform is even more significant than Florida’s 2019 CON overhaul.
The report lays out six options for CON reform, ranging from full repeal, which would increase access to healthcare that costs less and is of higher quality, to modification of the criteria, which seeks to mitigate the worst effects of CON laws. Although enacting reform under a Democrat White House and Congress might be a challenge, Mitchell remains optimistic.
“CON really isn’t a federal issue at this point and so I don’t think any change at the federal level will make much of a difference,” Mitchell said.
The real impetus for reform, Mitchell predicts, will come from the public.
“Most people are completely unaware of CON laws and would be shocked to learn that health care providers must first prove to a regulator that their community needs a service before they may offer it,” Mitchell said. “They would be doubly shocked to learn that the provider’s competitors often sit on the regulatory body and essentially get to veto the competition. Even when providers don’t sit on the CON board, they are typically invited to protest the applications of competitors.”
If CON laws are repealed, Americans will be better for it, Mitchell argues.
“Patients in non-CON states enjoy greater access to lower cost and generally higher-quality care,” Mitchell said.
Madeline Peltzer (email@example.com) writes from Hillsdale, Michigan.
Matthew D. Mitchell, “Certificate-of-Need Laws: How They Affect Healthcare Access, Quality, and Cost,” Mercatus Center, George Mason University, May 21, 2020: https://www.mercatus.org/essays/certificate-of-need-con-laws-research-healthcare-access-quality-cost#ruralaccess