Certificate of need (CON) laws limit the number of healthcare practitioners allowed to operate in a specific area, the size of their facilities, and the amount of medical equipment they can acquire. The regulations have remained controversial since their introduction 60 years ago, due to their obvious restriction of the healthcare supply, but proponents claim they are necessary to ensure healthcare access for indigent patients.

However, government-supported statistics contradict the claim that CON laws improve indigent care levels, and the federal government discourages state CON programs. Sound studies, complete with regression analyses, have proven the assertion false. And even on paper, the justifications are baffling.

So, why does the idea refuse to die? 

The Beginning Of The CON

The origin of this myth might be traceable to the origin of widespread CON laws. In 1974, the federal government passed the National Health Planning and Resources Development Act, which withheld federal aid for indigent care from states that did not implement CON laws. Almost immediately, 49 states (all but Louisiana, which held out until 1991) adopted them.

In other words, CON laws helped provide indigent care because the government ruled that CON laws would help provide indigent care. They could just as easily have ruled that CON laws would prevent states from receiving federal indigent care funds, and CON laws would correctly have been said to harm indigent care. (This possibility may become a reality, in fact.)

The obvious solution to the lack of indigent care in non-CON areas was to change the law and provide federal funds equally, which is exactly what the government did in 1986 when it repealed its 1974 mandate. However, the original law has likely forever linked the idea of CON to indigent care benefits. 

Current Justifications

A year after New York introduced the first CON law in 1964, President Johnson signed the bill creating tax-funded Medicare and Medicaid for the elderly and indigent. These programs continually expanded, and more than a third of the country is on at least one of them today. 

Because these programs sometimes pay less than private insurance does for a given procedure, and non-profit hospitals are required to accept them to maintain their tax-exempt status, non-profit hospitals frequently express concern that they will be unable to remain afloat if private facilities proliferate. Thus, they tend to support CON legislation.

However, as in the case of the first reason noted, the very people purporting to solve the problems of indigent care are in reality causing them. The Mississippi Hospital Association recently worried about proposed CON repeal because they feared their “heavy administrative overhead” rendered them unable to compete with new hospitals. They were concerned that for-profit hospitals would take the privately insured patients.

In any other business, the solutions would be to lower overhead costs, operate more efficiently, and make the experience more attractive to more customers (patients). Surely that is a reasonable expectation here, especially considering taxpayers are largely shouldering the burden that the hospitals are complaining about. 

In addition, states have the option of restructuring their healthcare system so that their Medicare and Medicaid reimbursement rates more closely match market rates, as Louisiana recently did. (Mississippi said this would actually make them lose more money, which seems to just indicate even more mismanagement of the entire system and more reason to look into the CON rules.)

Does CON “encourage more charity care for impoverished and underserved communities”?

Washington, D.C. stipulates that a medical facility cannot accept a donation of equipment worth more than $350,000 without getting a certificate of need. (For reference, a magnetic resonance imaging machine (MRI) can cost $3 million.) 

To receive a CON, an applicant must first submit a letter of intent and attend a pre-application conference, then wait 60 days to file the application. They must then allow six months for the government agency to make a decision. With appeals, CON battles in some places have gone on for more than a decade

During the review period, a public hearing takes place to determine the merits of the request. Notably, competitors of the medical organization can argue against them and prevent them from obtaining a CON.

It is difficult to understand how CON regulations that prohibit charitable donations could be seen as a means to improve healthcare delivery to the disadvantaged. Again, the only benefit here is to an existing hospital, which does not face the competition of another hospital having better equipment.

Also worth mentioning is that for-profit hospitals voluntarily donate approximately the same percentage of expenses to indigent care as do government hospitals, and they donate more than do non-profit hospitals. Whether due to tax benefits of such benevolence or for purely altruistic reasons, private individuals and organizations seem to manage their voluntary charity care better than the government manages forced “charity” care. 

Ending The Myth

Clearly, reasons other than track record and logic are perpetuating the myth that CON legislation helps indecent patients. Lack of education certainly plays a part, as the laws are relatively obscure and have changed drastically over time. Many people affected by them do not know they exist, and others may only have heard the talking points offered by advocates.

The advocates themselves obviously gain substantially by maintaining the status quo. Existing hospitals halt competition. Existing systems continue without having to improve. 

Ending CON will cause significant angst in the healthcare biosphere. But understanding the most common indigent care excuses enables activists and voters to better argue against them.