Ensuring there is no competition for local hospitals and not enough hospitals

What this really means is that Hospitals in certain states have a monopoly on health care and use it to their advantage to make more profits at the cost of health care for the residence of that state. 

Several states are the biggest users of these laws those states include Arkansas, Florida, Georgia Hawaii, Illinois and Virginia which have restrictions on the development or expansion of certain health care facilities and beds through a needs and utilization assessment process. Why not an outright moratorium, a state planning agency may determine there is no need for additional health care facility beds or services in a particular county or district.

In some of these states in order to build a new facility you need the state leaders to vote to let someone else build a facility.  When this happens, the local hospital operating there always blow up and sues so that a new facility is not needed. A lot of time and money will pass under the table to ensues no new facility are built.

Nine states—Florida, Georgia, Maryland, Ohio, Rhode Island, Tennessee, Vermont, Virginia and Washington—enacted legislation in 2019 to modify CON regulations for certain health facilities and services.

Certificate of Need (CON) laws are state regulatory mechanisms for establishing or expanding health care facilities and services in a given area. In a state with a CON program, a state health planning agency must approve major capital expenditures for certain health care facilities. CON programs aim to control health care costs by restricting duplicative services and determining whether new capital expenditures meet a community need.

State Legislative Actions

In the past several years, many states have introduced or enacted legislation to change their CON program. Changes range from fully repealing an existing CON program to creating a new CON program. The following are state examples of legislative actions impacting CON programs:

  • 35 states currently maintain some form of CON program. Puerto Rico, the US Virgin Islands and the District of Columbia also have CON programs. States retaining CON laws often regulate outpatient facilities and long-term care. This is largely due to an increase in free-standing, physician-owned facilities.
  • Nine states—Florida, Georgia, Maryland, Ohio, Rhode Island, Tennessee, Vermont, Virginia and Washington—enacted legislation in 2019 to modify CON regulations for certain health facilities and services.  
  • Three states—Arizona, Minnesota and Wisconsin—do not officially operate a CON program, but they maintain several approval processes that function similarly to CON.
  • 12 states fully repealed their CON laws. New Hampshire was the most recent repeal, effective 2016.

Intent and Structure of CON

The basic assumption underlying CON regulation is that excess health care facility capacity results in health care price inflation. Price inflation can occur when a hospital cannot fill its beds and fixed costs must be met through higher charges for the beds that are used. Larger institutions generally have larger costs, so hospitals and other health facilities may raise prices in order to pay for new, underused medical services or empty beds. CON programs require a health care facility to seek a health planning agency’s approval based on a set of criteria and community need. Once a health facility has applied for state approval, the health planning agency may approve, deny or set certain limitations on a health care project. 

While the effectiveness of CON programs continues to be a heavily debated topic, many states consider CON programs as one way to control health care costs and increase access to care. Below is a list of both arguments in favor and against CON laws.

  Arguments In Favor and Against CON Laws  
Proponents of CON Laws Argue:Opponents of CON Laws Argue:
Health care cannot be considered as a “typical” economic product. Most health services (like lab tests) are ordered by physicians, not patients. Patients do not shop around as they do for other goods and services. CON programs limit health care spending.  CON programs help distribute care to disadvantaged populations or geographic areas that new and existing medical centers may not serve. Removal of CON will favor for-profit hospitals which may be less willing to provide indigent care.  Removal of CON will lead to a proliferation of “low-volume” facilities, which some view as providing lower quality care.   CON requirements do not block change, they mainly provide for an evaluation, and often include public or stakeholder input.By restricting new construction, CON programs may reduce price competition between facilities and keep prices high. Some changes in the Medicare payment system (such as paying hospitals according to Diagnostic Related Groups – “DRGs”) may make external regulatory controls unnecessary by sensitizing health care organizations to market pressures.  CON programs vary state to state, with inconsistent metrics and management.  CON programs allow for political influence in deciding whether facilities will be built, which can invite manipulation and abuse.  Some evidence suggests that lack of competition encourages construction and additional spending. Identifying the “best interests” of a community isn’t always clear; decisions ostensibly made for the greater good could have unintended consequences in the long-term, particularly in an unsteady economy or, for example, in a rapidly-gentrifying community. 

 

Moratoria

As part of a CON program, some states may place certain health care facilities and facility beds on moratorium. This means a state planning agency will grant no CONs for certain facility capital expenditures. Moratorium regulations most often affect nursing facilities and other long-term care facilities.

Several states—including Arkansas, Florida, Georgia, Hawaii, Illinois and Virginia—have restrictions on the development or expansion of certain health care facilities and beds through a needs and utilization assessment process. Why not an outright moratorium, a state planning agency may determine there is no need for additional health care facility beds or services in a particular county or district.

More to come

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