It’s a usual regulation in a healthcare industry known for plenty of unusual rules: In 36 states and the District of Columbia, a healthcare provider hoping to open or expand her patient offerings must first prove to regulators that her community needs the service.
Providers can spend years and burn through tens or even hundreds of thousands of dollars to prove this need and thus obtain what is called a “certificate of need” (or CON). The CON process can be required for both small and large investments: from hospital beds and gamma knives to new hospitals and neo-natal intensive care units.
Originally intended to discourage the use of expensive technologies and procedures, in many states a CON is now required for relatively lower-cost modes of care such as ambulatory surgery centers and for services unlikely to be over-prescribed such as drug-rehabilitation services and hospice care.
The federal government once required states to have CON rules in order to obtain certain federal funds. But since the repeal of that mandate in the late 1980s, a substantial minority have done away with their CON programs. Of those that have retained the regulation, many have scaled it back. In June, Florida moved to eliminate its CON requirements for new hospitals, specialty hospitals converting to general hospitals, and for a raft of other service providers such as children’s care and substance abuse hospitals.
Related article: The Future of the ACA
About four in 10 Americans now live in a state without a CON requirement. These include urban, rural, low-income, and high-income populations alike. What are the experiences of patients and providers in these communities? What has happened to access, quality, and costs of care?
Using decades’ worth of state data, researchers can compare outcomes in CON and non-CON states. These statistical analyses include control variables that account for possibly confounding factors such as local economic and demographic patterns.
Their findings are consistent with economic theory: CON laws seem to limit access to healthcare, fail to increase the quality of care, and contribute to higher costs. I take each of these in turn.
The strongest evidence on the effects of CON relates to access to care. Economic theory predicts that a CON law will restrict the supply of healthcare services, and that once repealed, patients will tend to access greater levels of care.
Indeed, researchers have found that states that have removed these rules have more hospitals and more ambulatory surgery centers per capita. They also have more hospital beds, dialysis clinics, and hospice care facilities. Patients in non-CON states are more likely to utilize medical imaging technologies and less likely to leave their communities in search of care. Though CON advocates sometimes claim that the rules protect rural facilities, states without CON laws have more rural hospitals and more rural ambulatory surgery centers than states with CON laws.