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Research & Commentary: West Virginia Considers Ending Obtrusive Certificate of Need Laws

January 16, 2020

In this Research & Commentary, Matthew Glans examines a new bill in West Virginia that would completely repeal the state’s CON laws and delete references to the certificate of need program throughout the state code.

West Virginia is one of 35 states that limit the ability of health care providers to expand their businesses through an approval process known as certificate of need (CON). West Virginia’s certificate of need program is one of the most onerous in the country, restricting 23 devices and services, including organ transplants, psychiatric services, and acute hospital beds. West Virginia’s CON law covers more services than the national average (14), giving the state a ranking of 6th in the Mercatus Center’s study examining the restrictiveness of state CON laws.

The West Virginia Legislature is now considering a bill, House Bill 2007, that would completely repeal the state’s CON laws and delete references to the certificate of need program throughout the state code.

Repealing West Virginia’s certificate of need laws would roll back an outdated rule that has a strong negative effect on health care in the state. A state profile of West Virginia’s CON laws conducted by the Mercatus Center at George Mason University, which relied on existing data of the costs of CON laws in other states, estimates total health care spending could drop by $232 per person if CON laws were repealed. In addition to lowering health care costs, eliminating West Virginia’s certificate of need law would improve the quality and access of health care.

According to the Mercatus study, West Virginia would have 17 more health care facilities in the state, including 11 additional rural hospitals, if it did not have CON requirements. Patients would also have access to more imaging tests outside a hospital setting, thus requiring less travel to obtain care.

Recent research from the Mercatus Center found CON laws are associated with fewer rural health care facilities, lower-quality care, and an increase of 3.1 percent in overall health care spending—5 percent for physician care. When it comes to Medicare, CON laws increase overall spending by 6.9 percent. This means West Virginians are paying more for less.

As one example, the Cardinal Institute for West Virginia Policy points to a 2016 rejection of a telehealth expansion by the University of Pittsburgh Medical Center hospital system as an example of positive advancements in care being stymied by the states CON laws.

“Take one recent example. In 2016, the UPMC hospital system—consistently ranked among the best in the country—was not allowed to operate its telemedicine service in any of West Virginia’s 55 counties.

This could have been a match made in heaven. One of the country’s poorest and most unhealthy states (at least by some metrics) could have had access to low-cost telemedicine services performed by a premier hospital. Yet the need for these services has yet to be ‘justified’ to state regulators, so West Virginians are left waiting.”

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.

The Cardinal Institute also points to recent research from James Bailey, a health economist at Creighton University who found that states experience “a 0.8 percent annual reduction in overall health care spending after repealing CON laws. After five years and an overall decline of about 4 percent, spending levels off.”

In testimony before the West Virginia Senate Health and Human Resources Committee in 2017, Christopher Koopman of the Mercatus Center argued West Virginia’s CON laws hurt residents of the state more than CON laws do in other states.

“Our research suggests that folks in places like Charleston, Huntington, Parkersburg, Wheeling, and Martinsburg have fewer options, are forced to travel farther, and face higher costs than those living in cities across Ohio and Pennsylvania,” Koopman said. “It also means that doctors and providers may choose to open and expand their practices outside the state, rather than subject themselves to the certificate of need process, thereby increasing the gap between what is available here and what is available outside the state.”

A full repeal of burdensome and unnecessary regulations in West Virginia, including CON laws, would benefit all health care providers and their patients. In an article in Antitrust, Maureen K. Ohlhausen, a commissioner at the Federal Trade Commission, 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,” wrote Ohlhausen.

The West Virginia Legislature would be wise to consider ending these disruptive laws.

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

Garrett Ballengee and Chris Koopman: Certificate-of-Need Programs Backfire
https://www.cardinalinstitute.com/update/garrett-ballengee-and-chris-koopman-certificate-of-need-programs-backfire-daily-mail/
In this article, Christopher Koopman of the Mercatus Center at George Mason University and Garrett Ballengee of the Cardinal Institute examine how certificate of need laws have impacted health care in West Virginia and why it should be repealed.

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.

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.

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 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, Federal Trade Commissioner 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.

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
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