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Research & Commentary: West Virginia Bill Would Eliminate Certificate of Need

February 19, 2021

In this Research & Commentary, Christina Herrin evaluates a bill moving through the West Virginia Legislature that may repeal West Virginia's certificate of need laws.

West Virginia is one of 35 states that enforces outdated certificate of need (CON) laws. In simple terms, CON laws require government approval before health care facilities can expand existing operations, such as adding new beds, or open new health care facilities. The intent of CON laws is to control costs by reducing duplication of services, but the reality is quite the contrary.

According to the Kaiser Family Foundation, states operating with CON laws have health care costs that are on average 11 percent higher than states operating without CON. However, the negative impact of CON laws extends far beyond higher health care costs.

Unfortunately, these antiquated laws also reduce health care access for rural communities. Moreover, these laws have been linked to reduced quality of care in hospitals. States operating with CON laws have mortality rates 5.5 percent higher than states operating without CON, according to a report by the Mercatus Center

House Bill 2077, introduced by Rep. Margaret Summers (R-District 49), would repeal West Virginia’s certificate of need laws by declaring, “…the certificate of need program previously authorized by this article is terminated as of July 1, 2021. Any reference elsewhere in this code to a certificate of need as required by this article shall cease to be enforceable as of that time. A health care facility may not be required to obtain a certificate of need or similar authorization after that date before operating in this state.”

Eliminating these outmoded regulations would more than likely decrease health care costs in the state. Research conducted by the Mercatus Center found that spending could drop by $232 per person if CON laws were repealed.

Aside from cost reductions, evidence indicates that repealing CON laws also improves quality of care and access to it. According to the Federal Trade Commission (FTC) and Department of Justice (DOJ), certificate of need laws dramatically decreases the utilization of new technologies in health care.

According to a FTC-DOJ press release, “State CON programs generally prevent firms from entering certain areas of the healthcare market unless they can demonstrate to state authorities that there is an unmet need for their services.” By creating such barriers to entry and expansion, CON laws impede the efficient functioning of health care markets, to the detriment of both health care providers and consumers, the joint statement says.

Furthermore, certificate of need laws, vestiges of a bygone era, are inherently anti-competitive and breed cronyism by creating barriers to entry. They undercut consumer choice and reward existing health care providers with pseudo-monopolies.

Repealing CON laws would also unleash the forces of innovation within the health care market, which are held at bay by these obsolete laws. Like in all other industries, robust competition leads to breakthroughs. CON laws, by nature, stifle competition and retard innovations in the medical marketplace, to the detriment of consumers.

In an article in Antitrust, Maureen K. Ohlhausen, a commissioner at the FTC, argued 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. 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,” Ohlhausen writes.

Rep. Summers, sponsor of HB 2077, is an emergency room nurse who has a noteworthy perspective as a health care professional. She had this to say about how CON laws impact her patients: “Why should we as a governmental regulatory body prohibit other providers from coming in that would take care of those patients? Choice is all we have for these patients. That is the only control that patients have. As a state, through the Certificate of Need process, we are denying that from happening all in the name of trying to control health care costs. What costs more: driving to another facility in your area or driving an hour away because your area is not allowed to get approval to have another facility?”

Like many states, West Virginia has made efforts over the years to reform CON laws. Although this is a good first step, a full repeal would be much more beneficial for West Virginians. As such, West Virginia legislators should strongly consider the benefits of repealing CON laws, which would overwhelmingly help their constituents. The evidence is clear, CON laws do not protect consumers because they inhibit health care expansion and competition. Patient-centered care starts with removing barriers to entry into the health care marketplace, which is exactly what CON laws have devolved into. 

 

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


Certificate of Need Laws: West Virginia State Profile
https://www.mercatus.org/system/files/west_virginia_state_profile.pdf
This state profile from the Mercatus Center examines West Virginia’s CON laws and compares the health care outcomes and costs in other states to those in West Virginia. The studies attempt to give some insight into what is likely to happen in West Virginia if the state were to eliminate its 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 that 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.

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.

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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 subject, visit The Heartland Institute’s website and PolicyBot, Heartland’s free online research database. 

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