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Montana Is on the Brink of Certificate of Need Law Reform By Christina Herrin

April 21, 2021

In this Research & Commentary, Christina Herrin evaluates how Montana would benefit from Certificate of Need Law Reform

Montana is one of 35 states that still has Certificate of Need (CON) laws. These laws regulate health care facilities and require that any expansion of an existing medical facility or construction of new facilities is approved by a state review board. CON laws are outdated and increase health care costs, resulting in reduced competition and less innovation.

The bureaucratic process to prove there is a need in the market is erroneous at best and downright cronyism at worst. All too often it results in less competition by limiting startups from entering the industry. Montana CON requires at least a six-month review process and a fee of $500 or .03% of the project’s capital expenditures, whichever is greater.

CON laws have been around for decades and the evidence shows that they have not met their original goal of making health care more accessible and affordable. Instead, they have produced the opposite effects. The negative impacts of CON can be seen in the high costs and outdated technologies in states that enforce these laws. According to the Kaiser Family Foundation, health care costs are 11 percent higher in states operating with CON than those without. A George Mason State Profile of Montana found that if the state’s CON laws were repealed, state health care costs could be reduced by $214 per person each and every year.

There is little to no doubt that CON increases health care costs across the board. What’s more, it also limits accessibility for vulnerable patient populations. States operating with CON have fewer hospitals and ambulatory surgery centers. As a result of the laws, rural communities have been hit the hardest due to restrictions on new facility development where they are most needed. 

One of the most negative aspects of CON laws is the inherent cronyism embedded into the policy. CON operates to protect existing providers, thereby creating government-sanctioned monopolies that limit competition, resulting in a host of negative consequences. As history has shown time after time, the government simply doesn’t have the ability to determine supply and demand. Only the free market can do that. So, what good are these laws other than the fact that they supply favoritism to established industry leaders?

Fortunately, Montana has been addressing health care issues this legislative session. So far, Montana lawmakers have sought to apply free-market principles to several pressing health care problems, including expanding direct primary care and telehealth, and reforming CON.

After the onset of the COVID-19 pandemic, many states slashed regulations to allow the health care industry to meet the needs of patients. Now many Americans are asking the important question: If these laws and regulations weren’t necessary during a worldwide pandemic, when are they ever necessary?

If the Montana Legislature is unable to fully repeal CON laws, reforming the current policy would at least be a good step in the right direction. Like all states, Montana should aim to make CON laws as least restrictive as possible.

 

The following documents provide additional information about certificate-of-need laws.

Certificate of Need Laws: Montana State Profile
https://www.mercatus.org/system/files/montana_state_profile.pdf
This state profile from the Mercatus Center examines Montana’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 Montana if the state were to eliminate its CON laws.

Entry Regulation and Rural Health Care: Certificate-of-Need Laws, Ambulatory Surgical Centers, and Community Hospitals
https://www.heartland.org/policy-documents/entry-regulation-and-rural-health-care-certificate-need-laws-ambulatory-surgical-ce
Thomas Stratmann and Christopher Koopman of the Mercatus Center at George Mason University evaluate the impact of CON regulations related to ambulatory surgical centers (ASCs) on the availability of rural health care. Their research shows despite the expressed goal of ensuring that rural populations have improved access to health care, CON states have fewer hospitals and ASCs on average—and fewer in rural areas—than states without CON regulations.

Certificate-of-Need Laws Lower Quality of Care, Study Finds
http://www.modernhealthcare.com/article/20160928/NEWS/160929875
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.

The Great Healthcare CON
http://fee.org/the_freeman/detail/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
http://www.ncsl.org/research/health/con-certificate-of-need-state-laws.aspx
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 the government relations team, at governmentrelations@heartland.org or 312/377-4000.

Author
Christina Herrin is a former state government relations manager at The Heartland Institute.
cherrin@heartland.org @_Free2Choose