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Research & Commentary: Georgia Considers Ending Certificate of Need Laws

February 22, 2018

In this Research & Commentary, Matthew Glans examines a bill in Georgia that would end the state's certificate of need law.

Certificate of need (CON) laws have proven to be a troublesome policy for Georgia, with facilities around the state maneuvering to circumvent the law by courting exemptions for their expansions, using the law to block competitors from entering the market or challenging the Georgia CON law directly in court.

One bill now being considered in the Georgia Legislature would end the state’s CON law altogether and leave the free market in control of how the health care market expands. Sponsored by state Sen. Michael Williams (R-Cumming), the bill would repeal the state’s certificate of need program, effective December 31, 2018. Proponents of the bill argue a freer market would provide the best way to give the state’s residents access to high-quality health care at the lowest possible cost.

Several studies have shown CON laws fail to achieve many of their stated goals and increase costs for consumers by hindering competition and forcing providers to use older facilities and equipment. A recent state profile of Georgia’s CON laws conducted by the Mercatus Center, which relied on existing data of the costs of CON laws in other states, estimates total health care spending could drop by $217 per person if CON laws were repealed.

In addition to lowering health care costs, eliminating Georgia’s certificate of need law would improve health care quality and access. According to the Mercatus study, Georgia would have 51 more health care facilities in the state, including 38 additional rural hospitals, if it did not have CON requirements. Patients would also have greater access to imaging tests provided outside of a hospital setting, thus requiring less travel to obtain care.

A study by Thomas Stratmann and David Wille of the Mercatus Center analyzed the effect of CON laws on specific metrics for nine different quality indicators at 921 hospitals and found the health care quality measures were significantly lower in CON states compared to states without CON laws.One of the biggest discrepancies identified in the study is difference in the rate of mortality resulting from complications in hospitals. In CON states the mortality rate was about 5.5 percent higher than the average rate in non-CON states.

Data from the Kaiser Family Foundation found a positive correlation between the number of CON law restrictions and the cost of health care. States requiring certificates of need on 10 or more services averaged per-capita health care costs that are 8 percent higher than the $6,837 average for states requiring certificates of need for fewer than 10 services.

A full repeal of burdensome and unnecessary regulations such as CON would benefit all health care providers and their patients. In an article in Antitrust, Maureen K. Ohlhausen, a commissioner at the Federal Trade Commission, argues CON laws are not the right mechanism for encouraging a proper distribution of health care facilities. “States that still have CON laws on the books should repeal them,” Ohlhausen wrote. “States that deem indigent care mandates necessary should fund them directly and publicly, rather than through an opaque transfer of those costs onto the insured public. Good government demands both transparency and political accountability.”

The following articles provide information about certificate of need laws.
 

What Georgia Should Do About Certificate of Need
http://www.georgiapolicy.org/what-georgia-should-do-about-certificate-of-need/
Writing for the Georgia Public Policy Foundation, Dr. Brenda Fitzgerald examines the effects of certificate of need laws in Georgia and suggests how the state should reform its CON laws: “Only when the majority of health coverage is consumer-driven, and there is transparency of cost and quality, will the market will be able to control cost.”

Certificate of Need Laws: Implications for Georgia
https://www.heartland.org/policy-documents/certificate-need-laws-implications-georgia
Examining certificate of need laws in Georgia, Thomas Stratmann and Christopher Koopman of the Mercatus Center at George Mason University argue CON laws do not control costs but instead decrease the supply and availability of health care services by limiting entry and competition. They recommend legislators repeal these laws and open up markets for greater entry, more competition, and ultimately more options for those seeking care.

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

Certificate of Need Laws: A Prescription for Higher Costs
https://www.ftc.gov/system/files/documents/public_statements/896453/1512fall15-ohlhausenc.pdf
In this an article from Antitrust, Maureen K. Ohlhausen, a aommissioner at the Federal Trade Commission, outlines several reasons why states should repeal CON laws.

Certificate-of-Need Laws and Hospital Quality
https://www.heartland.org/publications-resources/publications/certificate-of-need-laws-and-hospital-quality
Thomas Stratmann and David Wille of the Mercatus Center at George Mason University challenge the claim CON laws improve hospital quality. “Using a broad dataset, the study finds no evidence that CON laws improve hospital quality. In fact, there are more deaths and serious postsurgery complications in hospitals in states with CON laws,” wrote Stratmann and Wille.

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.

Certificate of Need Laws: A Prescription for Higher Costs
https://www.heartland.org/publications-resources/publications/certificate-of-need-laws-a-prescription-for-higher-costs
In this article published in Antitrust Magazine, Maureen Ohlhausen examines CON laws and argues for their repeal. “Regardless of one’s perspective on the proper balance between state and federal power, there are some very good reasons to repeal state CON laws,” wrote Ohlhausen.

Do Certificate of Need Laws Increase Indigent Care?
https://www.heartland.org/publications-resources/publications/do-certificate-of-need-laws-increase-indigent-care?source=policybot
Thomas Stratmann and Jacob Russ of the Mercatus Center at George Mason University examine certificate of need laws and their effects on pricing and health care access. “While certificate of need laws significantly reduce available health care services for everyone, they do not lead to an increase in care for the needy.”

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 John Nothdurft, The Heartland Institute’s government relations director, at john@heartland.org or 312/377-4000.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR