Research & Commentary: Certificate of Need Debate Continues in Georgia

Published November 3, 2015

Georgia is one of 36 states with certificate of need (CON) laws, intended to slow the growth of health care prices, promote consolidation of health care providers, and limit duplication of services. Georgia requires 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 the offering of new inpatient care beds, services, and medical procedures.

Recent studies show CON laws fail to achieve many of their stated goals and increase costs for consumers by hindering competition and forcing providers to use older facilities and equipment. A study by the Mercatus Center at George Mason University ranks Georgia’s certificate of need program as the nation’s 18th most restrictive. The study’s authors say CON regulations limit health care competition across the state and leave fewer options for everyone, especially the poor.

Georgia’s CON laws are currently facing two challenges. The first is a lawsuit filed by two doctors, Hugo Ribot and Malcolm Barfield, OB-GYN surgeons who own the Georgia Advanced Surgery Center for Women in Cartersville. The two doctors are seeking to open a second facility, which other surgeons would be permitted to use when Ribot and Barfield are not. The two doctors say allowing other surgeons to use the second facility would help reduce overhead and give patients increased access to the surgery center. Recent studies found surgery centers such as the Georgia Advanced Surgery Center for Women saved the Medicare program and its beneficiaries $7.5 billion.

Georgia’s CON law agency, the Georgia Department of Community Health, turned down the doctors’ application, arguing the second center is not needed because the doctors cannot be in two locations at once and the second center would not be used daily. The Goldwater Institute says the decision forces patients to pay thousands of dollars more for procedures performed at the main hospital. Hospital Corporation of America, the largest hospital corporation in the country, owns a facility across the street and opposed the doctors’ application.

The second challenge facing Georgia’s CON laws highlights how disruptive and corrupting those laws can be. In 2008, the Georgia legislature amended the state’s CON law to allow the construction of a 50-bed “destination cancer hospital,” a Georgia location for Cancer Treatment Centers of America (CTCA), which opened in 2012. Now CTCA is seeking to get rid of the 50-bed limit as well as a provision requiring 65 percent of its patients be from outside Georgia. CTCA also has asked to become a general hospital.

Instead of giving special treatment to specific providers, the state should open up competition by rolling back its CON laws. CON laws give current suppliers of health care services an unfair advantage while keeping out new entrants into the marketplace such as CTCA.

The unintended consequences of CON laws have led many experts to call for repeal or reform. Georgia lawmakers should consider further reforming the state’s CON program to end burdensome regulations that increase the cost of health care while limiting access.

The following documents provide additional information about certificate of need laws.

Goldwater Institute Sues to Throw Out Georgia Law that Stopped Doctors from Expanding Surgery Practice
The Goldwater Institute discusses in a press release the lawsuit by two Georgia doctors challenging the state’s certificate of need laws: “Certificate of Need laws were supported by the federal government in the 1970s as a way to reduce healthcare costs; but evidence demonstrated the laws did the opposite: they restricted access to care and raised costs. The federal government repealed its Certificate of Need requirement in 1986. The Department of Justice and Federal Trade Commission released a statement encouraging all states to repeal their certificate of need laws, calling them a ‘detriment’ to patients.”

CON Laws Show Georgia’s Dilemma in Improving Health Care
Kyle Wingfield of the Atlanta Journal-Constitution examines the debate over Georgia’s CON law system and the 2008 decision to allow the construction of a Georgia branch of the Cancer Treatment Centers of America. 

Jim Manley: Goldwater Institute’s Lawsuit Against Georgia’s CON Laws
In this episode of the Heartland Daily Podcast, Jim Manley, a senior attorney at the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation, joins Health Care News Managing Editor Kenneth Artz to talk about the Goldwater Institute’s lawsuit on behalf of two doctors against officials at the Georgia Department of Community Health in Fulton County Superior Court. The lawsuit challenges the state’s medical certificate of need law, arguing on five counts the law is unconstitutional and “a restraint on competition, economic liberty, and consumer choice.” 

What Georgia Should Do About Certificate of Need
Writing for the Georgia Public Policy Foundation, Dr. Brenda Fitzgerald examines the effects of Georgia’s certificate of need laws and suggests reforms: “Only when the majority of health coverage is consumer-driven, and there is transparency of cost and quality, will the market will be able to control cost.” 

Certificate of Need Laws: Implications for Georgia
Examining Georgia’s certificate of need laws, Thomas Stratmann and Christopher Koopman of the Mercatus Center at George Mason University argue CON laws do not control costs but instead decrease the supply and availability of health care services by limiting market entry and competition. They recommend legislators repeal these laws and open up 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 the 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 examines certificate of need regulations in the first of a series of annual research papers 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 argues federal marketplace interventions have proven disastrous. Doherty writes, “In the past 20 years, many of us have battled to moderate or eliminate the most egregious of these programs and the artificial controls they place on free markets, but despite our successes, vestiges of the past remain.” 

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


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