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Tennessee CON Phaseout Faces Resistance

November 4, 2019

Forces are lining up against a proposed legislative phaseout of Tennessee’s certificate of need (CON) laws as a key lawmaker appears to be siding with a hospital system that claims repeal will put community hospitals in financial jeopardy.

Two bills to reform the state’s CON laws are under consideration in the state Senate. H.B. 1085 would eliminate the state’s CON laws over a five-year period, except for those regarding nursing homes. H.B. 0075 would address CON in distressed, rural areas by allowing providers to bypass CON approval if an area lacks an emergency room, surgical center, or a particular outpatient diagnostic service.

The chairman of the Tennessee Senate Health and Welfare Committee, state Sen. Rusty Crowe, told WJHL-TV he does not support full repeal, saying, “Our process is pretty darn good. I think it needs to be modified, and we’re going to modify it.”

Crowe does contract work for the state’s only hospital system, Ballad Health, which issued an even stronger criticism of proposed reforms.

In a written statement, Ballad Health said “certificate of need laws have long protected the public from for-profit and other organizations cherry picking profitable services while leaving community hospitals to care for those with Medicaid or without the means to pay. Unnecessary duplication of services leads to financial jeopardy for community hospitals.”

Clean Bill of Ethical Health

Crowe told Health Care News he has taken steps to eliminate any conflict of interest.

“I did ask for an advisory opinion relative to votes that might in any way affect Ballad,” said Crowe. “The Ethics Committee response was that all my actions were proper, following all ethics disclosure and rules. I would always cast my vote based on what is right and maintain neutrality.”

Crowe says Ballad is prohibited from opposing a certificate of need award to competitors under terms it accepted this summer when Wellmont Health System and Mountain States Health Alliance merged to become Ballad Health. The prohibition applies only to competitors who accept Medicaid and uninsured patients.

 “Our state’s CON rules will most probably change in the near future, as we are currently studying and looking at what other states are doing,” said Crowe. “We want to make it as fair as possible for all who apply.”

The Tennessee General Assembly reconvenes on January 14 to finish its biennial session.

Limits to Growth

CON laws require health care providers to get government permission to build or expand facilities or offer new services. CON laws emerged four decades ago when the federal government, in an attempt to improve quality and access, compelled states to restrict competition in health care markets. The laws failed to achieve those goals, and Congress repealed the federal statute in 1987.

Tennessee is one of 35 states that have kept CON laws on the books. Its laws restrict and regulate 26 health care services, more than most states, according to the Mercatus Center at George Mason University, which monitors these laws.

CON laws are bad for the health care system, says Matthew Glans, a senior policy analyst at The Heartland Institute, which publishes Health Care News.

“Certificate of need laws are obtrusive barriers to the natural development of the health care market,” said Glans. “The United States leads the world in health care quality and innovation because we embrace the power of the market and health care competition. States with CON laws, like Tennessee, unnecessarily limit the expansion of health care providers and services and hinder competition.

“Most CON regulations should be fully repealed,” said Glans. “CON laws are not the best mechanism for encouraging a proper distribution of health care facilities. Even worse, CON programs lack transparency and political accountability.”

 

AnneMarie Schieber (amschieber@heartland.orgis managing editor of Health Care News.

Author
AnneMarie Schieber is a research fellow at The Heartland Institute and managing editor of Health Care News, Heartland's monthly newspaper for health care reform.
amschieber@heartland.org @HCPolicy