A new study by researchers at the Mercatus Center at George Mason University says certificate-of-need laws, sold as a way to improve health care access and reduce costs, are having the opposite effect.
The study found that patients living in states with certificate-of-need mandates receive significantly worse health care than patients living in states without such regulations, which empower regulators to determine if there is a community need for new health care facilities or an expansion of existing services before allowing them to enter the market.
In addition to reviewing health care provider applications, state regulators often set facility standards and set quotas on the number of procedures that can be performed.
But the study shows that such restrictions on market forces are not having the effect the regulators intended.
Hospitals in states with CON regulations report more deaths and more serious post-op complications, write the study’s authors, Thomas Stratmann, a scholar at the Mercatus Center and university professor of economics and law at George Mason, and David Wille, an alumnus of the Mercatus Center MA Fellowship at Mason.
Data show that hospital patients in CON states fare worse than patients in states without such regulations.
In the Mercatus study, which looked at 900 hospitals from 2011 to 2015, patients at CON-restricted hospitals performed worse on eight of nine indicators. On four of these indicators, CON hospital performance was worse at a statistically significant level: heart failure mortality rate, heart attack mortality rate, pneumonia mortality rate, and death among surgical inpatients with serious treatable complications.
The study focused on areas with Hospital Referral Regions straddling the borders of CON and non-CON states, where demographic markers such as age, income, education, and ethnicity were comparable.
Thirty-five states and the District of Columbia have CON laws giving state regulators control over new services, facilities and equipment.
The rationale behind the regulations is that without CON laws, hospitals and other providers would be able to choose what services to offer, and might over-invest in expensive technology in order to attract patients, leading to higher patient costs.
In the real world, that’s not how it has worked.
“These restrictions have largely failed to reduce costs, but they certainly reduce services,” Strattman wrote earlier this year in a Wall Street Journal op-ed he co-authored with Mason Ph.D. student Matthew C. Baker. “A 2011 study in the Journal of Health Care Finance found that certificate-of-need laws results in 48 percent fewer hospitals and 12 percent few hospital beds.”
More than 20 CON states limit the introduction of additional diagnostic tools such as MRIs, CTs and PET scans, all crucial for patient care.
Not only do certificate-of-need laws restrict patient access to important medical procedures, they also result in fewer providers from which to choose.
The application process for health care providers looking to open or expand a facility in CON markets is time-consuming and expensive. The average application fee costs $32,000 — not much for a giant nonprofit like INOVA, but burdensome for small physician groups and solo providers.
“Many hospitals lend support to regulation of their industry, as such laws limit the number of industry competitors,” Strattman and Baker wrote in the Journal. “During a tussle in Georgia last year, state hospital associations — after donating $2 million to lawmakers, candidates, and political action committees — successfully stifled a cancer-treatment center’s bid to expand capacity. What’s best for patients is not the focus of these conversations.”