Research & Commentary: Ending Georgia CON Laws Would Spur Competition

Published August 30, 2018

Georgia is one of 35 states that institute certificate of need (CON) laws, which limit health care providers’ ability to expand services. In September, the House Rural Development Council (HRDC) will reconsider changes to Georgia’s CON program, including whether the program should continue.

In 2018, HRDC reviewed reforms that would end CON laws in urban areas but preserve them in rural counties. CON law supporters claim there is a need to protect access to health care in rural communities by shielding hospitals from increased competition. To protect patient access to health care in rural communities, several states have enacted restrictive regulations on what health care experts call “hospital substitutes,” such as ambulatory surgical centers (ASCs).

In a 2016 study, Thomas Stratmann and Christopher Koopman of the Mercatus Center at George Mason University found that after states implemented CON programs, they had fewer total hospitals and rural hospitals per capita.

Even worse, CON programs have resulted in “30 percent fewer rural hospitals per 100,000 rural population,” according to Stratmann and Koopman. Furthermore, the study found there are “14 percent fewer total ASCs per 100,000 state population and 13 percent fewer rural ASCs per 100,000 rural population.” According to the study, CON laws do not protect access to health care in rural areas.

CON laws have failed to improve health care access and have increased costs for consumers by hindering competition and forcing providers to use older facilities and equipment. A state profile of Georgia’s CON laws conducted by the Mercatus Center, which relied on existing data from other states, estimates total health care spending could drop by $187 per person if CON laws were to be repealed.

In addition to lowering health care costs, eliminating Georgia’s CON laws would improve health care quality and access. According to the Mercatus study, if Georgia did not have CON requirements, the Peach State would have 74 additional health care facilities, 48 additional ASC’s and 27 rural hospitals. A study by Thomas Stratmann and David Wille of the Mercatus Center found that states with CON laws have a mortality rate about 5.5 percent higher than the average rate in non-CON states.

Data from the Kaiser Family Foundation found an inverse relationship between the number of CON law restrictions and the cost of health care. States requiring certificates of need on 10 or more services averaged per-capita health care costs 8 percent higher than the $6,837 average for states requiring certificates of need for fewer than 10 services.

Unnecessary CON regulations should be repealed in full. In an article in Antitrust, Maureen K. Ohlhausen, a commissioner at the Federal Trade Commission, argued CON laws are not the right mechanism for encouraging a proper distribution of health care facilities, lack transparency, and political accountability and should be repealed.

The Georgia Legislature should consider rolling back these disruptive laws. Ideally, a full repeal of burdensome and unnecessary regulations such as CON laws should be applied across the board in Georgia and in every other state, a move that would benefit all health care providers and their patients.

The following articles provide information about certificate of need laws.

What Georgia Should Do About Certificate of Need
Writing for the Georgia Public Policy Foundation, Dr. Brenda Fitzgerald examines the effects of certificate of need laws in Georgia and suggests how the state should reform its CON laws: “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 certificate of need laws in Georgia, 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 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.

Certificate of Need Laws: Georgia State Profile
This state profile from the Mercatus Center examines Georgia’s CON laws and compares health care outcomes and costs in other states. The studies attempt to give some insight into what is likely to happen in Iowa if the state were to eliminate its CON laws.

Certificate of Need Laws: A Prescription for Higher Costs
In this an article from Antitrust, Maureen K. Ohlhausen, a commissioner at the Federal Trade Commission, outlines several reasons why states should repeal CON laws.

Certificate-of-Need Laws and Hospital Quality
Thomas Stratmann and David Wille of the Mercatus Center at George Mason University challenge the claim CON laws improve hospital quality. “Using a broad dataset, the study finds no evidence that CON laws improve hospital quality. In fact, there are more deaths and serious postsurgery complications in hospitals in states with CON laws,” wrote Stratmann and Wille.

Certificate-of-Need Laws Lower Quality of Care, Study Finds
Shelby Livingston of Modern Healthcare examines a new study from the Mercatus Center that argues certificate of need laws that govern the construction and development of health care facilities do not raise the quality of care at hospitals and may even lead to higher readmission rates.

Certificate of Need Laws: A Prescription for Higher Costs
In this article published in Antitrust Magazine, Federal Trade Commissioner Maureen Ohlhausen examines CON laws and argues for their repeal. “Regardless of one’s perspective on the proper balance between state and federal power, there are some very good reasons to repeal state CON laws,” wrote Ohlhausen.

The Great Healthcare CON
Jordan Bruneau of the Foundation for Economic Education finds CON laws raise health care prices and reduce availability. 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 price, 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 the various state CON laws and the positions of CON law proponents and critics.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at [email protected] or 312/377-4000.