Will hospital associations’ support help preserve state certificate of need programs?

Feb. 17—A January announcement by Florida Gov. Rick Scott marks the latest salvo in an escalating effort to roll back state certificate of need (CON) programs.

Scott, a Republican, said he would work with the Republican-led state legislature to repeal the Sunshine State’s CON program.

“This session, I want to fight to make the healthcare system fair for families and ensure healthcare works for patients and not for hospitals’ bottom lines,” Scott said in a release. “I will champion legislation that will repeal the outdated certificate of need program, repeal the cap on trauma centers, and ensure transparent and upfront pricing for patients.”

Scott said the state’s CON law erects barriers for new healthcare facilities and reduces competition for healthcare services.

CON laws restrict entry into healthcare markets until state regulators agree there is a “community need” for new or expanded medical services through a state health policy plan. At one point, 49 states had such laws. But since a federal CON requirement was repealed in 1986, one-third of the states have dropped their CON laws.

If Florida is successful in repealing its CON law, it would join 16 other states--most recently New Hampshire in 2015 and Wisconsin in 2011, according to the National Conference of State Legislatures (NCSL). 

Federal Support

Scott isn’t alone among government officials seeking to repeal state CON laws. Federal antitrust agencies in both the Obama and Bush administrations urged states to drop CON. In their October 2015 Joint Statement to the Virginia Certificate of Public Need Work Group, the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Justice Department (DOJ) said that “CON programs are a blunt tool for accomplishing the specific goal of providing care to the indigent and in medically underserved areas. They tend to sweep broadly, limiting competition for a wide variety of health care services.”

The DOJ and FTC disputed the contention that CON laws improve quality by concentrating high-volume, costly procedures in a limited number of locations and reduce the frequency of adverse outcomes.

Some healthcare experts are wondering whether the recent climate of de-regulation in Washington, D.C., will accelerate the elimination of state CON programs.

Healthcare Cost Effects

Christopher Koopman, senior research fellow at the Mercatus Center at George Mason University, said “there is great momentum towards drastically reforming, if not repealing, state CON laws. In the last legislative session, two dozen states introduced some CON reforms--some more drastic than others. North and South Carolina have pushed to reform or repeal their laws and Tennessee has made efforts in that direction, as well.”  

Koopman said that healthcare costs in CON states are higher than in non-CON states.

“And in our studies we found that healthcare outcomes are also different. You actually see higher quality, depending on how you measure it, in non-CON states,” Koopman said in an interview. “The data is consistent on this. CON laws do not increase quality or access or exert the cost control effects their proponents claim they do.”

If CON laws disappear, he said, new healthcare providers will enter the marketplace.

Matthew Glans, senior policy analyst with the Heartland Institute, said repealing CON laws would decrease the cost of healthcare services. Data from the Kaiser Family Foundation found healthcare costs were 11 percent higher in CON states than in non-CON states, Glans noted, adding that both patients and smaller health care providers would gain from repealing CON laws. 

“Competition will lead to lower prices and increased healthcare access for everyone,” Glans wrote in an email.

A 2016 Mercatus study analyzed the impact of CON laws for nine different quality indicators at 921 hospitals between 2011 and 2015. The researchers found the healthcare quality measures were “significantly lower” in CON states compared to states without CON laws.

“Ending CON laws would allow smaller facilities to offer new services, often at more convenient locations and lower prices,” Glans said. 

Ashley Noble, a policy specialist with the non-partisan NCSL, said states have introduced legislation to ratchet back or repeal their CON laws.

“That alone doesn’t mean much. Thousands of bills are introduced each year,” Noble said in an interview. 

She noted that before New Hampshire repealed its CON law last year and Wisconsin dropped its law in 2011, no other state had repealed such a law since 2000.

“Though the Republican party dominates state legislatures and governorships in the Deep South, most of those Red State CON laws receive broad support and seem likely to be around for a while,” Noble said.

The Case for CON Laws

Karen Cameron, a consultant with Cameron Targeted Solutions, said if a U.S. single payer was available, CON laws would probably be unnecessary.

“But we don’t [have single-payer] and what happens is that many providers only want to offer their services to well-insured people even as we have many Americans who can’t pay or don’t live where services are offered,” Cameron said. “We have a system that depends on capitalism running the system even when there is a public need. We need some kind of mechanism that allows people access and not just bigger profits to companies.”

Cameron said few of the outpatient specialty centers battling CON requirements accept Medicaid or high-risk patients.

“They cherry-pick the patients with the best insurance and know that the hospitals are required to accept the high-cost and poor patients,” Cameron said in an interview.

John Steen, a retired consultant to state CON agencies, said organizations that promote free market capitalism---business groups, conservative foundations and chambers of commerce---traditionally have opposed CON programs.

“CON is about the public interest as opposed to private interest and puts limitations on how capitalism plays out in healthcare within states,” Steen said in an interview. “Legislators are always taking potshots at CON laws. But I expect most will continue because they have widespread support from business and hospital associations.”

Steen said states grappling with high Medicaid costs, such as poorer southern states, keep CON laws because nursing homes are the primary drivers of Medicaid program costs, which is why some retain their CON laws.

“To keep their Medicaid budgets low, they have to control the growth of nursing homes and long term care payments and that’s what CON laws do,” he said.

Steen said that opponents of CON laws are misinformed.

“They talk about free markets,” he said. “But there are no free markets in healthcare. Government agencies set their payment rates. Insurers pay the bills, not patients.”

Paul Parker, director of the Center for Healthcare Facilities, Planning and Development, a division of the Maryland Health Care Commission, said opponents argue that CON laws limit people’s choices and prevent healthcare innovation.

“But their arguments are theoretical. One Mercatus study opposing a CON in Virginia said there would be 10,000 more hospital beds without the CON. In their view the CON makes Virginia a resource-starved state. But that’s ludicrous. The average occupancy of Virginia hospitals in 2015 was about 64%,” said Parker, who added that he speaks only for himself and not his agency. “It reflects a profound lack of knowledge about how the actual healthcare system in Virginia or the U.S. in general is functioning.”

Mark Taylor is a freelance writer based in Chicago. 

Publication Date: Saturday, February 18, 2017