May 1, 2019
By Naomi Lopez
Imagine if your local grocery store or gas station had to ask their rivals for permission to open a new store or station. As absurd as this sounds, this is what happens in the majority of states when it comes to opening a new hospital.
Many states are restricting the creation or expansion of healthcare facilities through certificate of need (CON) laws. Some states require the facility to seek permission from state-established boards with authority to approve or deny the applications. It should come as no surprise that these boards are often stacked with interests from would-be competitors, making the likelihood of approval slim and frequently resulting in a “competitor’s veto.”
That’s why it is great news that Florida has passed legislation that would “end the CON” for general hospitals. HB 21 has passed both chambers, and Florida Governor Ron DeSantis is expected to sign the bill into law.
While claimed to ensure the needy access to care and protect against over-capacity in healthcare, these laws may be having the opposite effect by limiting the availability of facilities and services for all consumers.
CON laws were originally established to counter the cost-plus reimbursement system. At the time, there was an incentive for facilities to expand their offerings, regardless of demand. Today, the cost-plus system no longer exists. Instead, hospitals are typically reimbursed a fixed amount by insurers for patient care—making these CON laws obsolete.
The same federal government that once encouraged the CON system has even abandoned it. According to a joint statement of the U.S. Department of Justice and the Federal Trade Commission:
Certificate-of-Need laws impede the efficient performance of health care markets. By their very nature, CON laws create barriers to entry and expansion to the detriment of health care competition and consumers. They undercut consumer choice, stifle innovation, and weaken markets’ ability to contain health care costs. Together, we support the repeal of such laws, as well as steps that reduce their scope.
Florida’s down payment on CON reform reflects a commitment to putting Florida patients first, allowing their communities and providers to decide where hospitals should be located. According to Sal Nuzzo, Vice President of Policy at the Florida-based James Madison Institute, “The repeal of anticompetitive certificate of need laws means that Florida can finally begin to address the healthcare supply challenges we face, without fear of existing participants shutting out competition.”
According to Nuzzo, Florida’s population is growing by 1,000 people every day—and this CON reform will benefit these new residents. “Our growing population will have greater access to higher-quality and more affordable healthcare because of this bold action by Florida policymakers. CON laws have consistently been proven to hurt patients, increase costs, and lower access. We hope that other states will do what every administration since Ronald Reagan has urged—to repeal these laws altogether.”
The damage that CON laws can do to patients has been the subject of recent Goldwater Institute research. In his report CON Job: Certificate of Need Laws Used to Delay, Deny Expansion of Mental Health Options, Goldwater National Investigative Reporter Mark Flatten documents the dire situation these laws have created for patients in need of mental healthcare and services—and the tragic results anti-competitive CON laws reap. You can read that full report here.
States have the authority to enact reforms that positively impact healthcare costs and access. Unleashing the availability of hospitals, as well as other healthcare facilities and technologies, by removing harmful CON laws is a good place to start.
Naomi Lopez is the director of healthcare policy at the Goldwater Institute.