If we want more rural hospitals and more affordable healthcare, we should scrap CON laws

By Steve Wilson
February 6, 2020

Imagine if Mississippi had a government agency that regulated the building of restaurants according to a centralized plan hatched by bureaucrats on the needs of the state’s foodies. 

Want to open a new restaurant in (insert any city here)? This fictitious body would analyze whether there was another similar eatery in the city and whether the city’s economy could support another with the same cuisine. The fictitious agency would issue a recommendation and a hearing officer would hold a hearing and make the ultimate decision on whether to allow the restaurant to be built.

This scenario sounds ridiculous, but this is no different than the regulation of healthcare providers in the state under what is called a “Certificate Of Need.” It stifles innovation and is a protectionist racket that puts a moat around the state’s healthcare industry to prevent entry by potential competitors.

Mississippi is one of 35 states with a CON program that requires healthcare providers to seek approval from the state Department of Health to build a new facility, add beds or diagnostic equipment to an existing facility, or any other capital-related project. Want to add more beds to your hospital or nursing home? You have to ask permission. Want to bring a new piece of diagnostic equipment to your facility? Permission is needed as well. Even building a medical office building or any other capital project requires approval. Even hospital repairs after a tornado and the addition of hurricane-resistant windows to a hospital on the Gulf Coast require health department approval. This is ridiculous.

Applying for a CON starts a 90-day process that begins with a staff evaluation using a Soviet-style central planning document, the state health plan. They make a recommendation and an independent hearing officer makes a ruling that can be appealed in local court. If you’re a local provider with an existing CON, you’re good to go as more than 91 percent of these applications were approved in the last decade. The rejects are most likely new providers seeking a CON in the state.

This isn’t a free process, since attorneys are required to draft the paperwork and charge the applicants for expensive billable hours for their work. These funds could go to patient care instead. Since 15.3 percent of the CON applications over the last decade were for cost overruns on capital projects by providers, this unnecessary need to seek a rubber stamp only added to the bottom line.

Advocates for the CON say that restricting healthcare options via regulation is a cost-cutting exercise. They also say that a CON ensures that rural patients have access to providers because they would cluster centrally in metropolitan areas to be closer to the majority of their patients. Research indicates otherwise.

According to several studies by the non-profit Mercatus Center at George Mason University, states with certificate of need regulations have 99 fewer hospital beds per 100,000 than states that don’t have a CON and have fewer diagnostic machines.

These same scholars also found that patients in states with a certificate of need were more likely to have to travel outside their county to access care. The ultimate kicker in the Mercatus research is the rural hospital issue; states with CONs actually have 30 percent fewer rural hospitals per 100,000 residents.

The best way to save Mississippi’s rural hospitals and improve the quality and access to care while lowering costs is to inject competitive market forces into the state’s healthcare industry. Scrapping the state’s certificate of need program would do exactly that.

This column appeared in the Meridian Star on February 1, 2020.


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