Thursday, November 21, 2019

Bigger Pie Forum: Certificates of Need Need to Go

Imagine if state government decided how many car dealerships were allowed in Mississippi.

Consumers would suffer as their choices would be limited compared with an unregulated system where auto dealerships could be built anywhere by anybody.

Mississippians now live and die in a healthcare system where the state Department of Health controls the supply of hospitals, clinics, diagnostic equipment, nursing homes and even home health providers. The rationale behind this system, known as Certificate of Need (CON), is that it will prevent unnecessary duplication of services and higher costs due to this duplication.

Some History: Certificates of Need began as part of the National Health Planning and Resources Development Act of 1974 that was signed into law by then-President Gerald Ford. The act was intended to curb big increases in federal healthcare spending and one of the cost control measures was to require states to institute CON laws to regulate the supply of healthcare facilities.


Thirty-five states still have some sort of CON laws of varying restrictiveness. Mississippi and nearby states have substantial CON regulations with Mississippi having 35 laws that govern its Certificate of Need Program.

Mississippi’s CON Program now regulates hospital beds, nursing home beds, inpatient psychiatric beds for children, chemical dependency beds and home health services.

The CON structure is a command and control system, not unlike the fascist regimes where government instead of the marketplace determines the allocation of resources and means of production. Unfortunately, limiting supply done to control costs often results in increased prices to the end user.

According to several studies by the free-market Mercatus Center at George Mason University, states with Certificate of Need regulations have 99 fewer hospital beds per 100,000 residents than non-CON states and have fewer diagnostic machines — 2.5 fewer hospitals providing MRI services than non-CON states.

A goal of CON regulations is to ensure access for underserved rural communities, but 25 years of data shows CON regulated states have 30 percent fewer rural hospitals per 100,000 residents. Additionally, according to a national report of rural hospitals, 48 percent (31 out of 64) of Mississippi’s rural hospitals are at high financial risk. Nationally, 21 percent are listed in danger of closing their doors.

The Obama administration was also in favor of eliminating Certificates of Need. A position paper, jointly written by the Federal Trade Commission and the Department of Justice and requested by South Carolina state officials in 2016 says CON laws interfere with market forces that can better determine the proper supply of facilities and services.

In short, the consequences of CON regulations include suppression of supply, misallocation of resources and the shielding of health care providers from competition that improves performance.

An example of this took place in Madison, one of the fastest growing cities in the state where St. Dominic’s Hospital sought to build a new facility in 2009 but was denied by state officials. The case ultimately went to the state Supreme Court which upheld the denial in 2012.

The fatal flaw in CON regimes is its willingness to protect incumbents under the assumption that all providers are equal and effective. Competition with the “invisible” but well informed “hand of the market” is a powerful tool in providing cost efficient services to healthcare consumers.

If Mississippi wants a financially healthier healthcare system, eliminating the Certificate of Need structure would be a great first step in the right direction.

This post was authored and sponsored by Bigger Pie Forum. 

 

19 comments:

Anonymous said...

If the State were burdened with having to pay for those car dealerships, I doubt there would be many. I have an idea what the answer to the health care problem is but putting more burden on the tax payer is, IMHO, not gonna solve it.

Don Drane said...

If a federal law required states to establish a CON program, how is it that 15 states don't have one (stated in your article)?

Both Baptist and St Dominic, in the Madison area, have substantial land holdings purchased with a goal of one day building hospitals. If they were free to do this (and I wish they were), what would become of the hospitals in Jackson? There's already a hospital further up toward Canton, but it's my belief that a majority of residents who can afford the luxury of 'hospital shopping' choose to avoid the place due to a perception and association with the prior hospital in Canton.

It's my belief also that health care facilities and government offices are about all that's holding Jackson together; however, that's not the intent nor responsibility of a CON program.

Anonymous said...

9:30 - Are you suggesting that all these Metro-Area hospitals are 'paid for' by the state? I can think of only one that is and it's probably 80% federally funded.

Anonymous said...

Wow citIng Obama for free market principles. Expand Medicaid and establish hospitals and OB-GYN care in rural areas where people are dying.

Anonymous said...

9:56 - thank you for that 'appeal to extremes - a logical fallacy'.

Another example: People's feet are falling off all over Jackson due to friction, frostbite and exposure to fire-ants. Please donate shoes to your favorite charity.

Or, a favorite November appeal from a Metro-Area soup kitchen: Our cupboard is almost bare and this is an emergency appeal for funds and canned goods.

Anonymous said...

9:30, I imagine if you count Medicare and Medicaid money, all our hospitals are "paid for" by the government.

Freedom would probably help increase the number of hospitals in MS, just as freedom would help this state in a lot of ways. The problem is that Mississippi doesn't like freedom and never has. We are the best in the U.S. at telling people who can and cannot be a citizen, who you can and cannot marry, what you can and cannot drink or smoke (we are pretty free about eating). So, anyone here who likes the idea of more freedom tends to get it by moving out.

According to BPF, the CON process started in 1974. MS had 2.4 million people that year. Today, we have 2.99 million. So, in 45 years, under Democrats and Republicans we have added a TOTAL of less than 600,000 people. For comparison, the Dallas/Ft. Worth area adds about 200,000 per YEAR right now.

So, if I was building a hospital, I wouldn't worry about the CON process in MS anyway because I would be building in a place that actually needs more hospital beds. That might be a better issue for BPF to tackle.

Anonymous said...

imagine if car dealerships

- charged the government untold amounts of money to deliver car service

- and were allowed to proliferate unabated without checks

- and life determining decisions were made by used car salesmen

what a stupid analogy

Thomas said...

I understand the author's point, but their choice of car dealerships as the example is a poor one. The state does regulate how many new car dealerships can be in a given area. Its called the relevant market area law. It allows an existing dealer of a car line to object to a new dealer of the same brand within a certain distance. see Miss. Code Ann. 63-17-116.

Anonymous said...

Here's a better example. Let's say hotels need an occupancy rate of 80% to make a profit. If there are so many hotels in a given area and because of that they have less than that then they lay off employees and only open a certain block of rooms. The customer doesn't really know the difference and those that suffer is the owner and the employees. BUT, when there are too many hospitals in a given area, the hospitals would have a tendency to cut services and then the patient suffers.

Anonymous said...

Not the author, but soon after Fed Gov't ended it's CON requirement, several states repealed their CON requirements.

Anonymous said...

Fraud is pervasive now

Imagine the hucksters and frauds selling Medicare and Medicaid snake oil on every corner

We have con laws and Jackson has more hospitals than it needs now!

You want more?

Anonymous said...

12:19 - That's not up to you. You have no right nor authority to decree that 'Jackson has more hospitals than it needs'. Half of the existing hospitals are ones I would not enter unless my foot was hanging by a thread and I was about to bleed out. That's my decision to make. What makes you think you have the right to that judgment? Let the market decide. Open a Baptist and St. D. in Madison and let the market watch the hospitals in Jackson go into decline and turn to shit.

If CON type regulations also controlled the ability to open clinics, there are about 30 in Madison and Ridgeland that would never have opened. They're scattered all over both towns. And the reason for that is free market.

Anonymous said...

9:36 is correct, the City of Jackson would be of no value to many if not for Hospitals and Medical Centers. Time to repeal these stupid barriers to free markets.

Anonymous said...

4:20 pm

And that’s the point of con laws

There must be a demonstrable need (not a desire) by you not to enter a hospital you deem beneath your status.

If karma means anything you’ll be laid up at UMMC in the ER next to a common human this weekend. Hope you can hold your nose fancy pants.

Anonymous said...

The CON law is creates higher cost to patients while the politicians get rich. The lobbyists and Hospital give them hundreds of thousands.

Take Me To Baptist said...

10:56 - No state has any authority to 'decide' who can and cannot be a citizen. Take a civics class.

6:20 - You can read on another thread this morning that your beloved UMMC rated a score of 1 (out of a possible 4). I would not enter that place as a patient, willingly, for any reason other than an extreme situation of trauma - and then I'd probably have no voice in the decision.

Status has nothing to do with my choice of hospitals. Education, experience and certain knowledge guide my choices in that regard.

Anonymous said...

"We have con laws and Jackson has more hospitals than it needs now! You want more?"

No. Most of us just want them located where we live. Everybody is skittish about traveling into the bowels (literally) of Jackson. Nobody wants to negotiate third world country roads to get to medical care.

Allow St Dominic and Baptist to utilize their properties outside of Jackson to build new and improved facilities where paying customers reside or can get to easily...also where family can stay in peace and safety while their loved ones are hospitalized.

The State's CON regulations are keeping that from happening. Frankly we're tired of driving into what seems like downtown Memphis for medical care and are opting for care in other parts of the South in many cases.

Anonymous said...

This may all soon be moot point....so much about MS is unconstitutional....MS is an organized, criminal operation obsessed with keeping "control" of its citizens.

https://abc11.com/health/court-allows-lawsuit-which-could-set-upend-nc-medical-market/5709266/

Anonymous said...

CON's have a value on financial statements. They can be bought and sold. I believe any license offered by the State should return to the State when no longer in use. Reminds me of cotton allotments.

Nursing homes are the worst. When you can't get someone into a place you can afford close to home, look at the process for CON's.


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