Georgia Moves Certificate of Need Reform

Beginning in 1964 with New York and extending to nearly every state throughout the 1980s, legislatures began to restrict the licensing of new medical  facilities in the hopes of improving access to affordable care by controlling where and when new facilities could be built.

In 1987, federal mandates requiring CON were removed. Since then, states have begun to reform or  repeal their CON laws as many legislatures have determined that prohibiting construction has not helped and may have harmed access to care.

Currently, 35 states and the District of Columbia require care providers to go through a CON approval process before constructing a facility, or in some cases even buying certain equipment such as imaging machines. As of 2022, 12 states have completely repealed their CON laws.

In 2019. Georgia modified its CON laws to through HB186 to increase the dollar trigger for hospital projects from $2.5 million to $10 million, as well as to ease some other provisions that restrict rural construction of patient service buildings.

Citing hospital closures and a growing doctor shortage in rural Georgia, legislators began looking for ways to improve access to care by removing CON requirements entirely. In 2023, the legislature formed a task force to look at possible solutions to the growing problem and what CON reform could do to help. The Study Committee’s recommendations  reveal a program whose bureaucracy has grown too big. Most construction and improvements are still extremely limited to projects such as replacement of already approved equipment or necessary changes to remedy code violations.

In addition to removing the restrictions on hospital beds, birth centers and research facilities, the recommendations include reviewing the limitations on in-patient psychiatry and removing all cost-triggers for equipment and construction.

HF1339 took recommendations from the Study Committee’s report in a comprehensive bill that stopped short of repeal. After taking up the house language, senators made substantive changes to five of 14 sections of the bill. Changes include exemption for an new Morehouse School of Medicine hospital, the reopening of closed hospitals, and the extension of rural hospital tax credits.

Patients benefit when states reduce regulatory barriers to the construction of new health care facilities. States with burdensome restrictions on new hospitals, surgical centers, diagnostic centers, treatment centers, and nursing homes should learn from the years of evidence that now clearly shows that the free market does a better job of controlling costs, and at least as good a job at ensuring people have access to health care as the moratoria.

A 2020 study by BMC Health Services Research showed results across 90 national studies, and determined that CON, “costs as well as adverse effects on health spending, exceed those benefits by an estimated $302 million a year. On average, the cost-benefit ratio is 1.08, meaning costs exceed benefits by 8%. Consequently, the weight of the evidence suggests that CON creates more costs than benefits.”

As the coronavirus took hold in early 2020, hospital beds quickly filled, and the top priority of every governor became finding more beds and ventilators to handle the coming wave of critically ill patients. Limiting hospital beds had already been viewed by many as a relic of the 1970s, but the pandemic made getting rid of bed restrictions an easy decision for governors looking to respond to the coming surge of critically ill people. In fact, 20 states quickly set aside certificate of need laws and more followed.

As the pandemic destabilized hospital revenues and tore through nursing homes, the desire to move away from very large, concentrated facilities became obvious. That realization has progressively turned to legislation to reform, unwind, and even outright repeal of outdated CON laws, which are increasingly being viewed as causing the very disparities they were supposed to prevent in the first place.

States like Georgia are using those learned lessons from the pandemic response to meet the challenges presented by rural care shortages. Challenging legacy assumptions heretofore insurmountable, legislators are quickly breaking new ground.

Originally published by The Heartland Institute.

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