Certificate of need laws, which require providers to get state approval before they build new facilities or expand services, are meant to prevent redundancies and restrain spending.
But more states are reconsidering the laws amid growing evidence that they may do more harm than good — and a new analysis from a libertarian think tank is likely to add more fuel to the fire, outlining how CON laws seem to limit care access, hurt quality and raise spending.
CON laws require providers like hospitals to prove to state regulators that there’s a “need” in a community for extra care before capital expansions can move forward. The idea behind the mechanisms, which are active in most U.S. states, is that duplicate services create waste and inflate costs.
But CON laws are increasingly falling out of favor. Critics in particular point to how CON laws make it harder for new providers to enter a market, benefiting large incumbent entities by preventing competition.
On Tuesday, the Cato Institute published an analysis of almost 130 studies digging into the laws that looks set to give more fodder to CON opponents.
More than half of the studies linked CON rules to a negative outcome, such as higher spending, poorer access or reduced care quality, according to Cato’s report. Just 12% found CON laws produced a positive outcome.
Meanwhile, states without CON laws had 24% more intensive care capacity, 50% more neonatal intensive care capacity, 16% more obstetric services and 37% more surgical intensive care capacity, the review found.
CON laws also appear to exacerbate healthcare access shortages in rural communities. Per a separate Cato analysis of county data, rural states without CON laws have more hospitals per capita than those with the regulations — 21.5 rural hospitals per 100,000 residents in states without the rules, compared to 7.4 in states with.
“The overwhelming weight of evidence suggests that the rules limit access, undermine quality, and raise the cost of care, demonstrating what standard economic theory predicts. These rules do not protect patients or payors; instead, they protect incumbent providers from competition, limiting patient access to higher-quality, lower-cost care,” wrote Stephen Slivinski, a senior fellow at Cato, and Matthew Mitchell, a senior fellow at Canadian think tank the Fraser Institute, in the brief.
“Reform of CON laws — including outright elimination of them — should be foremost on the mind of state policymakers seeking to expand health care access and encourage the affordability of vital health services,” Slivinski and Mitchell concluded.
CON laws began popping up in the 1960s. But almost all states had adopted the policies by the early 1980s, after Congress passed a law tying a state’s funding in federal healthcare programs to CON regulations.
Congress dropped the federal mandate in 1986, after CON programs failed to slow down cost growth. Support for CON laws has waned since, amid mounting concerns that the laws benefit entrenched legacy providers by giving them a legal avenue to object to competition.
Today, 39 states have a CON process for at least one healthcare service or technology, with 35 of those states enshrining the programs in law. But that number could shrink as states rethink their CON policies, with more state legislatures moving to study the efficacy of CON requirements or repeal the mandates altogether.
Nearly half of the 35 states with CON laws have informed the federal government that they plan to relax or eliminate them, according to the Healthcare Financial Management Association.
In April, Tennessee passed a bill to repeal its CON requirements for acute care hospitals. Hospital groups in the state were split over the bill, according to local reports — a divergence suggestive that CON laws could be losing steam, even among its traditional defenders.
In the past, hospitals have argued that preventing an oversupply of providers helps protect facilities treating vulnerable and low-income patients, which may have tighter margins. CON reform could otherwise cause those hospitals to shutter their doors or suspend certain services, hospitals have said.
The American Hospital Association declined to comment on the efficacy of CON laws, saying it was a state-by-state issue.
