With the year barely out of the gates, several southeastern states’ legislatures are leading the charge to amend or remove Certificate of Need laws that place unfair barriers to much-needed, price-reducing competition in the healthcare industry. Certificate of Need (CON) laws are a category of healthcare regulations that require healthcare providers to apply to their state for permission to start or expand a service or facility.
To gain permission, the provider has to pay hefty fees and prove that their community needs this new service—a process that can take several years and that is unheard of in most other industries. Imagine the state requiring a new restaurant or retail store to prove the need for their business.
It’s true that many other businesses and professional services require a license from the state. But CON laws carry a very strange addition to normal business regulation rules: the competitor’s veto. During the CON law application process, any established healthcare provider in the applicant’s geographical area can weigh in on whether the need for a new provider really exists.
Should the government take PetSmart’s opinion about whether a person can be allowed to start a pet-grooming business? Should McDonald’s get to decide whether Chick-fil-A can add on to its dining room?
Let’s take a sanity pause here. How on earth did this start, and what’s being done about it?
In the 70s, a national mandate for state CON laws was established to supposedly give patients better access to care and to keep costs down by limiting how many providers were allowed to operate in a vicinity. However, like many regulations, CON laws produced the opposite of their intended effects by restricting innovation and price competition in the healthcare industry. Though President Reagan convinced Congress to repeal the federal mandate for CON laws, only a minority of states have done away with them. As of August 2022, CON laws still exist in 35 states plus the District of Columbia.
The ultimate result of these laws today is reduced access to health care. CON law states have 30% fewer hospitals per capita, which results in their people having to travel farther to receive care than those who reside in states without these regulations.
According to a report by the Institute of Justice, CON laws often restrict provider choices that one would think should be allowed as simply part of their regular practice, such as “adding or removing a single hospital bed; opening a home health agency; converting an existing hospital bed to a different use (e.g., psychiatric bed to intensive care unit bed); adding ventilator services to a facility; performing a small or necessary renovation,” etc. These restrictions posed considerable problems during the COVID pandemic because they limited hospitals’ flexibility. That is why, two months into the pandemic, many states “suspended or loosened CON requirements” to help this essential industry combat COVID more effectively.
However, in 2022, West Virginia, South Carolina, and Georgia all failed to pass CON reform legislation.
But 2023 is bringing another liberating wave of state action against CON laws. Though the bills in Virginia failed to leave the committee stage, other states may have better outcomes. In South Carolina, the Senate passed a repeal of their CON laws, and it will be read by the House very soon. North Carolina just filed the reform of their CON laws at the end of January. Mississippi’s legislature failed last week to reform their CON regulations, but Americans for Prosperity Mississippi plan to keep the effort alive and try again next year. In Georgia, the fight to repeal is still going strong.
CON laws don’t really protect patients. They only serve to protect established healthcare providers and hospitals against competition. So, out of self-interest, hospital associations are fighting back against attempts to remove or reform CON laws.
Let’s hope lawmakers in states where CON laws persist do the right thing and repeal them. Freeing healthcare providers to establish or expand their offerings to patients (without asking permission of the state or their market competitors) is one step toward a freer and more patient-centered healthcare system—meaning more affordable and accessible care for everyone. It’s time we stopped getting CONned.