Competition in an industry fosters lower prices, better service, and increased options for customers, and consumers in the United States expect antitrust legislation to discourage companies from forming monopolies. Legislation encouraging providers to shut out their competitors in a market as important as health care therefore flies in the face of reason, but certificate of need (CON) laws function exactly this way.

For sixty years, CON laws have enabled existing medical businesses to legally prevent new ones from opening, with the express intent of preventing competition. These rules are not safety regulations. Incumbents are not tasked with showing the proposed new practice is incompetent. They simply have to claim the new one will adversely affect their business.

Expectation vs. Reality

In theory, a knowledgeable and unbiased board decides which medical practitioners are “needed” and awards certificates accordingly. In theory, the board considers community input, and mandatory disclosure of conflicts of interest prevents incumbents from axing new practitioners for selfish reasons.

In reality, existing practitioners often sit on the board and prevent new competition from opening. They ignore the will of community members who plead for more healthcare affordability, availability, and options. They clearly have a conflict of interest, yet they are given free rein to control the local market of this life-saving commodity. A look at the composition of the New York CON board shows the system is broken. And a look at the outcomes shows how dangerous this is.

The New York CON

New York has the dubious honor of being the birthplace of CON laws. It introduced the first one in 1964, so its history and current situation provide possibly the best illustration of their drawbacks.

A New York CON board consists of 31 members, at least six of whom must be policymakers currently working in the medical field. Six members must also be licensed physicians, one member must represent home health agencies, and two members must represent mental health organizations. In other words, these people have a vested financial and political interest in refusing to grant certificates. 

No more than 15 members can be currently employed in this way, but a change in their employment status does not render them ineligible. This means that not only can medical practitioners and their representatives almost comprise a majority from the start, but with a change in a member’s employment, people with the most obvious conflict of interest imaginable can make up an outright majority.  

It’s important to note further that members enjoy a type of qualified immunity shielding them from lawsuits. They have wide leeway to demand documents and set timetables making the CON process absurdly difficult and expensive for their competitors seeking a certificate. The application alone can cost $3,000, and the vague requirements mean the board can make applicants jump through literally endless paperwork hoops.

How has this affected health care in New York? The most obvious effect came during the COVID-19 pandemic, when New York infamously experienced dangerous hospital crowding with no recourse until Governor Cuomo lifted CON restrictions on March 12, 2020. The very fact the law needed repealing to manage a crisis shows how counterproductive it is.

Even before the pandemic, New York’s healthcare system was struggling. Authorities could not keep up with the caseload of CON applications. A moratorium was applied on new home health agencies, preventing the very long-term care facilities so desperately needed in 2020 from having room. 

Approximately 33% of New York hospitals received a dismal one-star rating from the Centers for Medicare and Medicaid Services, compared to just 5% nationally. New York should know better than anyone how damaging these laws are, but supporters have kept their stranglehold on the legislation that benefits them. 

CON Across The U.S. 

Voters and legislators would do well to research the local rules of every CON board in the 35 states that enforce this legislation. By their very nature, CON boards tend to be comprised of people who benefit from prohibiting new medical professionals from practicing. Furthermore, other existing medical organizations can usually speak at CON hearings, and they tend to claim their states are not in “need” of any further competition. 

CON laws are inherently anti-competitive, so it should be no surprise they have been used to squeeze out new businesses. This would be bad enough if the rules governed the fast food or sports apparel markets. But when applied to the healthcare sector, they are exceptionally harmful.