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RESEARCH & COMMENTARY: THE HAWKEYE STATE DOES NOT NEED CERTIFICATE OF NEED LAWS

January 13, 2021

In this Research & Commentary, Christina Herrin provides evidence of the need for reform of unnecessary certificate of need laws, which are currently enforced in Iowa.

Iowa is one of 35 states still enforcing unnecessary Certificate of Need (CON) laws. CON laws require any new health facility including hospitals, nursing homes, outpatient surgery centers, or anyone purchasing medical equipment valued above $1.5 million to apply for approval through a regulatory review process to receive a certificate of need prior to expansion or development. The Iowa Department of Public Health and the State Health Facilities Council determine if there is enough need within the community to justify any new facility or expansion. 

Supporters of these laws often claim that these regulations are necessary to control health care costs, but that is not true. The law of supply and demand would prove otherwise. Limiting supply and access to care for patients allows for monopolistic practices, which increases costs and harms the very people the laws are supposed to help. According to a Kaiser Family Foundation study, health care costs are 11 percent higher in states operating with CON laws than those without. 

On March 17, 2020, Iowa temporarily suspended CON laws in response to the COVID-19 crisis. This action draws upon a bigger question: if these laws aren’t necessary during a pandemic, why are they deemed necessary any other time? 

Innovation is stifled when competition is limited, and patients suffer the consequences. Rural Iowans are suffering at an alarming rate. In a study released in February 2016, Thomas Stratmann and Christopher Koopman of the Mercatus Center at George Mason University found states restricting entry and competition through a CON program had fewer total hospitals and fewer rural hospitals per capita. When controlling for certain demographics and year-specific effects, CON programs result in “30 percent fewer total hospitals per 100,000 state population and 30 percent fewer rural hospitals per 100,000 rural population,” wrote Stratmann and Koopman. “Moreover, we find 14 percent fewer total ASCs [Ambulatory Surgical Centers] per 100,000 state population and 13 percent fewer rural ASCs per 100,000 rural population.” 

Further, innovation is stifled when competition is limited, and patients suffer the consequences. CON laws limit new technological advancements and the development of new health care facilities. At least that is the case for Dr. Lee Birchansky, who for more than 20 years has attempted to bring options to patients in Iowa. His effort to open his own surgery center has been an ongoing battle with the state because of CON laws. Currently, Dr. Birchansky is forced to perform cataract surgeries at his competitors’ facility when he would rather open his own surgery center next to his office in Cedar Rapids. 

Dr. Birchansky brought this issue to the legal system and had his day in court to challenge Iowa’s CON program, which infringes on his Constitutional rights. Sadly, in April 2020, the Eighth Circuit Court of Appeals ruled against Dr. Birchansky. Thankfully, Iowa did the right thing and granted Dr. Birchansky’s CON application so he can now move forward with opening his surgery center. This 20-year battle should not be the path medical professionals in the Hawkeye State must take to provide for patients. These laws are protectionist and control the market, resulting in high costs and limited access. 

Dr. Birchansky stated, “Patients and doctors—not state officials—are in the best position to decide what healthcare services are needed.” And he is right, individuals are better off when left to make decisions for themselves, not succumbing to an overreaching government. 

The fight against CON laws in America is far from over, and millions of patients are negatively impacted every day these laws are left on the books. States operating with CON laws ought to reform and repeal these laws immediately. These laws are a direct link to cronyism and contribute to limited access and rising costs for patients. 

 

The following documents provide additional information about certificate of need 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.

Are Certificate-of-Need Laws Barriers to Entry? How They Affect Access to MRI, CT, and PET Scans
https://www.heartland.org/policy-documents/are-certificate-need-laws-barriers-entry-how-they-affect-access-mri-ct-and-pet-scan
A study published in January 2016 from the Mercatus Center at George Mason University examines how CON regulations affect the availability of imaging services provided by hospitals and other medical providers. The results show CON regulations adversely impact non-hospital providers; hospitals largely remain unaffected. The study also shows residents of CON states are more likely to travel out of state to obtain imaging services than residents of non-CON states. 

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 post surgery complications in hospitals in states with CON laws,” wrote Stratmann and Wille.

CON Job: Certificate of Need Law Used to Delay, Deny Expansion of Mental Health Options
https://goldwaterinstitute.org/article/con-job-certificate-of-need-laws-used-to-delay-deny-expansion-of-mental-health-options/
In this article, Mark Flatten of the Goldwater Institute discusses how certificate of need laws hold back the expansion of needed mental health care facilities.

 

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 Health Care News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus, host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact the government relations team at governmentrelations@heartland.org or 312/377-4000.

Author
Christina Herrin is the Campaign Manager for Free to Choose Medicine.
cherrin@heartland.org @_Free2Choose