Research & Commentary: Missouri Should Pursue Certificate of Need Reform

Published April 15, 2016

A major health care construction project bringing new mental health facilities to Columbia, Missouri was recently rejected by the state’s certificate of need (CON) board. The proposed facility from Oceans Healthcare would have been a 60-bed psychiatric facility in south Columbia. The certificate of need committee voted 5–2 to reject the plan, declaring the facility is not needed at the proposed location.

The decision by the state’s CON board had placed a spotlight on Missouri’s obtrusive certificate of need laws. Missouri is one of 36 states that currently use certificate of need laws, which are meant to slow the growth of health care prices, promote consolidation of health care providers, increase charity care, and limit duplication of services.

Since 1980, Missouri has required CON commission approval for a wide range of expenditures, including construction and modification of health care facilities, the purchase of major pieces of medical technology, and offering of new inpatient care beds, services, and medical procedures. Missouri’s CON program regulates 14 medical services, devices, and procedures, which is the national average. In a study published by the Mercatus Center at George Mason University, Thomas Stratmann, Christopher Koopman, and Mohamad Elbarasse ranked Missouri’s certificate of need program as the 21st most restrictive in the United States.

Mental health care is an important issue in many states, where capacity in available mental health facilities is not meeting demand. In an editorial in the St. Louis Post-Dispatch, Justin Haskins, executive editor at The Heartland Institute, argues more needs to be done in Missouri to address mental health issues. Haskins points to Missouri’s high suicide rates as one example of how CON laws are causing more trouble than they are worth. “According to the American Association of Suicidology, Missouri’s suicide rate of 15.9 per 100,000 people was the 18th-highest in 2012,” wrote Haskins.

According to the U.S. Department of Health and Human Services, Missouri currently has 105 different “health professional shortage areas” linked to mental health. Encouraging the construction of additional mental health facilities could combat this problem. Haskins notes studies have shown high suicide rates are linked to decreased access to mental health care services. Because CON laws are designed to limit access, Haskins argues they could lead to higher suicide rates. Haskins says of the 26 states with the greatest number of health professional shortage areas, 19 have CON laws, including Missouri.

Patrick Ishmael of the Show Me Institute argues in Health Care News Missouri legislators should avoid piecemeal or crony CON law reforms and move to eliminate the burdensome law altogether. “Unfortunately, the CON proposals that often come up in Missouri aren’t really about reform, but instead tinker around the edges of current law – either creating narrow exceptions for a special interest or else offering a patina of reform only to preserve the status quo. Policymakers shouldn’t be trying to just fix the state’s CON law; they should be trying to end it. We need competition in our health care to make care more available and affordable to patients. CON laws are an obstacle to both ends,” said Ishmael.

Current providers often use the CON process to block potential competition. Thus, CON laws raise the cost of medical care by preventing new medical providers from competing with existing hospitals. The unintended consequences of CON laws have led many experts to call for repeal or at least reform of these policies. Missouri lawmakers should look to reduce burdensome regulations that increase the cost of health care while limiting access.

The following articles examine certificate of need laws from multiple perspectives.

Entry Regulation and Rural Health Care: Certificate-of-Need Laws, Ambulatory Surgical Centers, and Community Hospitals
Thomas Stratmann and Christopher Koopman of the Mercatus Center at George Mason University evaluate the impact of CON regulations related to ambulatory surgical centers (ASCs) on the availability of rural health care. Their research shows despite the expressed goal of ensuring rural populations have improved access to health care, CON states have fewer hospitals and ASCs on average—and fewer in rural areas—than states without CON regulations. 

Are Certificate-of-Need Laws Barriers to Entry? How They Affect Access to MRI, CT, and PET Scans
A study published in January 2016 from the Mercatus Center at George Mason University examines how CON regulations affect the availability of imaging services provided by hospitals and other medical providers. The results show CON regulations adversely impact non-hospital providers; hospitals largely remain unaffected. The study also shows residents of CON states are more likely to travel out of state to obtain imaging services than residents of non-CON states.  

Certificate of Need Meeting Touches on New Type of Care Facility for Seniors
Travis Zimpfer of the Missouri Times reports on a recent certificate of need (CON) meeting where members discussed a new health care development that could affect how senior citizens recover from surgical care and the future of transitional care facilities in the state. 

Certificate of Need Laws: Implications for Missouri
Examining Missouri’s certificate of need laws, Thomas Stratmann, Christopher Koopman, and Mohamad Elbarasse of the Mercatus Center at George Mason University argue CON laws do not control costs and instead decrease the supply and availability of health care services by limiting entry and competition. They recommend legislators repeal these laws and open markets for greater entry, more competition, and ultimately more options for those seeking care. 

Do Certificate-of-Need Laws Increase Indigent Care?
Thomas Stratmann and Jacob Russ of the Mercatus Center at George Mason University examine certificate of need laws and their effects on prices and health care access. “While certificate of need laws significantly reduce available health care services for everyone, they do not lead to an increase in care for the needy,” Stratmann and Russ write. 

The Great Healthcare CON
Jordan Bruneau of the Foundation for Economic Education says CON laws powerfully distort the health care market. He advises, “Rather than pinning our hopes on grand plans to overhaul the system, we should first look at where we can make changes on the margin that would move us in the right direction. Abolishing CON laws—a barrier to entry that drives up prices, restricts access, and is maintained by cronyism—would be a great place to start.” 

Certificate of Need: State Health Laws and Programs
The National Conference of State Legislatures outlines various state CON laws and the positions of CON law proponents and critics. 

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems. 

CON Job: State “Certificate of Necessity” Laws Protect Firms, Not Consumers
Writing in Regulation magazine, Timothy Sandefur of the Pacific Legal Foundation argues certificate of need laws are not intended to protect the public but instead are designed to restrict competition and boost prices existing companies can charge. 

You Shouldn’t Have to ask Your Competitors for Permission to Start a Business
Ilya Shapiro of the Cato Institute argues CON laws make it more difficult and expensive for companies to create new jobs and innovate. Even more troubling, Shapiro says, is the use of CON laws by existing businesses to bar newcomers from competing against them. 

Certified: The Need to Repeal CON: Counter to Their Intent, Certificate-of-Need Laws Raise Health Care Costs
Jon Sanders of the John Locke Foundation says CON laws fail to lower health care costs and in many instances actually increase costs. Sanders says state leaders could best honor the intent behind CON programs – preventing unnecessary increases in health care costs – by repealing those laws. 

The Failure of Government Central Planning: Washington’s Medical Certificate of Need Program
John Barnes of the Washington Policy Center describes the history of the certificate of need concept, summarizes how the Washington State CON law works, compares its stated goals with actual performance, and offers practical policy recommendations for improving access to affordable health care for the people of Washington. 

Certificate-of-Need Laws: It’s Time for Repeal
Roy Cordato of the John Locke Foundation (JLF) examines certificate of need regulations in the first of a series of annual research papers from JLF devoted to explaining the principles of free markets and applying them to current controversies in North Carolina. 

Certificates of Need: A Bad Idea Whose Time has Passed
In a policy analysis from the James Madison Institute, Peter Doherty notes certificate of need laws arose largely in response to federal incentives adopted in 1974 and have stifled competition, raised existing providers’ profits, and given “little or no benefit to consumers.” Doherty writes, “Despite all the good intentions and despite the federal government strengthening the role of state authorities in the late 1970s, it was clear by the early 1980s that the design was not working. Not only were costs failing to come down as a result of CON reviews by health care planning bureaucrats, but they were increasing.” He concludes CON programs should be abolished. 

Health Care in the States
Michael Tanner compares health care reform among the states. Without a universal model to follow, states are creating their own reforms. Tanner examines how cost-effectiveness, insurability, and affordability vary between states.


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