The healthcare system in the United States involves a maze of laws that operate virtually unnoticed. Service costs, waiting times, and travel distances vary from state to state, due not merely to chance, but to legislation. Two such laws, certificate of need (CON) and certificate of public advantage (COPA), recently combined to create a healthcare nightmare in Tennessee.

A Primer On CON Law

State CON rules restrict the number of medical providers permitted to practice in a certain area, and they limit the amount of equipment those providers are permitted to own. Although the broader community can usually express its desire (or lack thereof) for the prospective new practice, the existing healthcare providers also give their opinion. Of course, they rarely support new competition, so burgeoning medical practices in any of the 35 CON states face a tough battle even if the community clearly needs them. 

If you consider restricting healthcare access to be a baffling means of increasing it, you are not alone. And if you believe stifling competition leads to worse service, you are also in good company. Economic theories, as well as decades of statistics, show CON laws have been a failure

COPA Allowances

Healthcare practices wishing to merge into a monopoly can legally do so if they operate in one of the 19 states that grant COPA allowances. In exchange for government permission to merge, the newly created medical behemoth agrees to abide by certain government rules ostensibly designed to offset the typical problems resulting from a monopoly.  

Not only does oversight of these hospitals require significant state resources, but perfectly balancing the pros and cons of a monopoly is impossible. The monopoly has the money, the time, and the power to make the new situation work to its advantage. Furthermore, the restrictive COPA rules, by which they are bound, expire leaving a healthcare giant with all the power and none of the restrictions. 

Tied At Both Ends 

COPA and CON laws allow powerful government lobbyists an unfair legal advantage over their competitors. And both provide examples of the government blatantly choosing winners and losers. Recently, Tennessee illustrated what happens in a state with both types of legislation.

Ballad Health, a 20-hospital monopoly covering more than one million residents and 29 counties in the Appalachian area of Tennessee and Virginia, achieved its monopoly status through a COPA granted by the state of Tennessee. Previously, the area had only two hospitals from which to choose, and Ballad merged the last two into one. In return for this advantage, it agreed to adhere to minimum charity care requirements and other guidelines aimed at offsetting its monopoly status. 

It promptly reneged on its end of the deal. 

Ballad provided an average of $37 million less per year than required in charity care. (It did, however, continue to bring lawsuits against patients who failed to pay bills.) It also failed 80% of the state tests designed to monitor its compliance with COPA. Emergency room wait times almost tripled, reaching an average of 11 hours. Despite this, the Tennessee Department of Health continues to give Ballad a nearly perfect score on its reports, and Ballad has faced no penalties of any kind. 

Meanwhile, its net annual profits jumped from $63 million to $143 million from 2021 to 2022. And CEO Alan Levine’s annual salary has almost doubled since the merger.

Because this debacle occurred in Tennessee, patients also face the added squeeze of CON laws that allow competitors to shut out new businesses. Potential new providers can easily see the need for their services in the area but cannot help without receiving permission to open. 

Although 16 hospitals have closed since 2010, prospective new ones still have to convince the government—and Ballad Health—that their services are needed. And since Levine views the Ballad merger as “hugely successful,” it seems unlikely he will consider new competition as “needed.” 

Tennessee And Beyond

Tennessee patients face a dire situation and are not the only ones vulnerable. Either type of legislation harms patients, but having both worsens the problem. And fourteen states have both COPA and CON. Residents must make clear to their representatives they will not tolerate having their health care held hostage, or the system will never improve.