Florida is one of 36 states that limit the ability of health care providers to expand their businesses through an approval process known as certificate of need (CON). CON laws were first passed in the 1960s by states in an attempt to slow increasing health care prices by limiting duplication and promoting health care consolidation. During the new legislative session, Florida House leaders have to once again started to discuss rolling back their certificate of need laws by eliminating the process for hospitals, nursing homes, and hospice facilities.
Ending CON requirements for hospitals, nursing homes, and hospice facilities would be a positive step for Florida. In recent years, smaller, independent ambulatory surgery centers (ASCs) have begun to enter the market, offering convenient same-day surgical care at a lower cost to patients. For years, hospitals have used CON laws to block the expansion of ASCs, skewing the system in their favor.
The stated goal of CON programs is to manage health care costs, yet research shows they actually increase costs for consumers by hindering competition and forcing providers to use older facilities and equipment. In a study published by the Mercatus Center at George Mason University examining Florida’s CON program, Thomas Stratmann and Christopher Koopman found states with CON programs regulate on average 14 different medical services, devices, and procedures. Florida’s CON program currently regulates 11, slightly below the national average. Mercatus ranked Florida’s certificate of need program as the 26th most restrictive in the United States.
Koopman and Stratmann say there may be 131 fewer hospital beds per 100,000 people in Florida compared to the rest of United States as a result of the state’s CON regulations. In Miami-Dade, estimates suggest CON law restrictions have resulted in 3,428 fewer hospital beds, between five and 10 fewer hospitals offering magnetic resonance imaging (MRI) services, and 18 fewer hospitals offering computed tomography (CT) scans. Koopman and Stratmann say Florida’s CON law limits health care competition across the state and leaves fewer options for everyone, especially the poor.
A new study by Thomas Stratmann and David Wille of the Mercatus Center at George Mason University analyzed the effect of CON laws on specific metrics for nine different quality indicators at 921 hospitals. The study reviewed data from 2011 to 2015 and found the health care quality measures were significantly lower in CON states compared to states without CON laws. One of the biggest discrepancies identified in the study is difference in the rate of mortality resulting from complications in hospitals. In CON states the mortality rate was about 5.5 percent higher than the average rate in non-CON states.
In addition to being linked to poor hospital quality, research shows CON laws drive up health care costs. Data from the Kaiser Family Foundation show health care costs are 11 percent higher in CON states than in non-CON states. The study also found a positive correlation 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.
CON laws give inappropriate influence to competitors during vetting processes. When a company applies to enter a new market, competitors often use the CON process to block potential competition. As a result, CON laws raise the price 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 the reform or repeal of these policies. The Florida Legislature is wise to consider rolling back these disruptive laws. Ideally, a repeal of burdensome and unnecessary regulations such as CON laws should be applied across the board, benefitting all health care providers.
The following documents provide additional information about certificate-of-need laws.
Certificate of Need Laws: Implications for Florida
Examining certificate-of need-laws in Florida, Thomas Stratmann and Christopher Koopman 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.
Is Florida’s Certificate of Need (CON) Program Necessary?
This Policy Brief from the Health Foundation of South Florida provides a summary description of Florida’s current CON program and the main arguments, both in opposition to CON regulations and in support of them, in the debate over whether to maintain the program in its present form.
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, 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.
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.
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 pricing 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.”
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.
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.
Health Care in the States
Cato Institute Fellow Michael Tanner compares health care reform among the states. Tanner says because there is no universal model available for states to follow, states create their own reform models. Tanner examines how these various efforts differ in cost-effectiveness and insurability, documenting states’ successes and failures.
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 Health Care News, 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.