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Americans for Prosperity Foundation Multi-State Investigation Shows True Cost of Certificate of Need Laws

Oct 6, 2021 by AFP

The organization’s report, “Permission to Care,” highlights lost economic activity, reduced access to care, and tragic health outcomes resulting from the outdated laws.

Arlington, Va. – Today, Americans for Prosperity Foundation (AFPF), a national nonprofit that educates Americans about the benefits of a free and open society, released the results of a four-state investigation into the true cost of certificate of need laws.

Certificate of need (CON) laws, which are on the books in 35 states, require health care providers to gain government approval before opening or expanding a facility, adding imaging devices and other medical technology, or offering new services. The laws often allow existing providers to object to new would-be competitors and use their incumbency status to influence government decision-making.

Initially enacted to control health care costs and prevent duplicative services, CON laws have become a major barrier to health care, particularly in underserved areas of the country. Several governors suspended their CON regimes when the pandemic arrived, but many of those suspensions have since expired. Experts now say the restrictions have contributed to hospital bed shortages in states that have been hit hard by the Delta variant.

AFPF’s new report, Permission to Care, illustrates how these laws have harmed patients in Iowa, Michigan, South Carolina, and Virginia. In each state, CON raises costs, reduces access to care, and promotes cronyism of the ugliest sort. Notable examples from the report include:

  • In South Carolina, legal challenges to CON decisions delayed the openings of much needed hospitals in two counties by over a decade.
  • In Michigan, objections from existing providers led to the denial or withdrawal of close to 75% of applications to build new nursing home beds.
  • In Iowa, a cancer center claimed that a competitor’s new radiation therapy center would force it to close—delaying the new one by over a year. Yet after the new one was finally approved, the existing provider not only stayed open but also invested in a $2.2 million renovation of its own facility.
  • In perhaps the most tragic example of them all, a Virginia mother lost her baby at a facility whose prior requests for new NICU equipment were denied.

The report shows that since 2016, CON laws have resulted in nearly $1 billion in lost health care investment across those 4 states alone. The true value of health care services forfeited in each state is much greater. This is because although health care entrepreneurs may aspire to offer some services in a state, they are unlikely to submit a CON application that they know will probably be denied.

“Certificate of need laws limit access to health care, reduce medical innovation, and put crony profits over patient wellbeing,” said the report’s authors, Kevin Schmidt and Thomas Kimbrell of Americans for Prosperity Foundation. “The fact that several governors quickly suspended CON restrictions when COVID-19 arrived says all you need to know about the necessity of these laws. The pandemic should make more states question whether forcing health providers to ask for permission to care is a good idea.”

For interviews with Kevin Schmidt or Thomas Kimbrell, please contact Geoff Holtzman at gholtzman@afphq.org.