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Research & Commentary: Certificate Of Need Laws Are Making Things Worse For Rural Access To Care

March 1, 2022

In this Research & Commentary, Matt Dean looks at how certificate of need laws for medical facilities are unnecessarily rationing care

Cook County’s North Shore hospital serves Minnesota’s sparsely populated arrowhead region on the western shore of Lake Superior. The critical access hospital makes do with fourteen beds and intermittent services such as ultrasound. Senator Tom Bakk has introduced legislation to relieve the small hospital from the prohibitively costly expansion approval process. Senate File 2704 simply allows very small critical access hospitals and nursing homes to add beds so long as the total number of beds is under 24. Why should a struggling critical access hospital be forced to go to the legislature to create a law allowing them to serve a handful of additional patients?

Minnesota has some of the most restrictive laws on the expansion of medical facilities in the country. In the best of times, Minnesota’s hospital bed moratorium and certificate of need laws place a harmful burden on hospitals. They unnecessarily limit the supply of care and unfairly burden smaller communities who cannot navigate the costly process.

In Sen Bakk’s district, the Cook Hospital and Care Center serves the community with 14 hospital beds and 28 in long term care for the town’s 574 people. In 2020, Cook lost over $1/2 million with the pandemic. That $500k could be the difference between making it and not for many critical access hospitals. That facility represents a major employer and critical need for aging residents. “If it wasn’t for the provider relief fund and paycheck protection program,” the administrator said, I’m not sure we would be making it.” If this facility needs to grow, going through the exclusionary process currently in place is likely impossible.

Not long after CON laws were instituted, legislators began to wonder whether the bureaucracies created to control the supply of care were making healthcare harder to find and more expensive to buy. A 2016 study at the Mercatus Center at George Mason University found that in the twelve CON systems studied, only one showed reduced cost, four showed no difference, and seven showed increased costs.

Because of the cost to grow, certificate of Need laws tend to drive expansion to larger, more centralized facilities, farther from home for people who live in rural areas. During COVID we have learned that smaller scattered facilities, closer to home for patients reduced the likelihood of contracting COVID19 in a care facility. 

For the past twenty years, skepticism has progressively turned into legislation to reform, unwind and repeal certificate of need laws. Studies have consistently shown that states with certificate of need laws have more expensive healthcare that is less available for people in rural areas. The CON legislation, aimed at preventing a “medical arms race” was causing the disparities it was supposed to prevent.

This realization led to an uncommon bipartisan reform in healthcare policy. The Obama and Trump administrations both promoted reforms aimed at reforming certificate of need legislation.

America’s struggling critical access hospitals need help to survive. The most critical barriers to access are distance, coverage, money, and staff. Hospital moratoria and certificate of need laws should be carefully replaced or removed to help struggling hospitals and the people they serve. 

 

The following articles provide more information about certificate of need laws.

 

 

The Pacific Legal Foundation examines the executive orders by governors to temporarily repeal provisions in their state’s certificate-of-need laws.

https://pacificlegal.org/certificate-of-need-laws-covid-19/

The Mercatus center finds rationing care costs more money:

https://www.mercatus.org/system/files/mercatus-mitchell-con-healthcare-spending-v3.pdf

A state-by-state look at restricted services

https://www.mercatus.org/publications/healthcare/con-laws-2020-about-update

Certificate-of-Need reform gains rare bipartisan support

https://www.forbes.com/sites/patrickgleason/2021/09/09/tearing-down-regulations-that-restrict-the-supply-of-health-care-has-become-a-bipartisan-affair/?sh=412fc8be2631

NCSL state-by-state legislative update on Certificate-of-Need with interactive map:

Certificate of Need (CON) State Laws (ncsl.org)

Article on small hospital struggles

Minnesota hospitals battle revenue decline, staff shortages | The Daily Briefing | businessnorth.com

A link to Senate File 2704 as introduced:

https://s3.amazonaws.com/fn-document-service/file-by-sha384/0635622ff6ddc7a78c5a2add381c2f161482af5b8c2d47f2d0f52fe152c582e19164aaead017ed8381fbd59095ee3236

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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 and other topics, visit the The Heartland Institute’s website

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Author
Matt Dean is Senior Fellow for Health Care Policy Outreach at The Heartland Institute.
mdean@heartland.org