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How Iowa health care is suffering under the state’s certificate-of-need laws

Nov 4, 2021 by AFP

Certificate-of-need laws have slashed hundreds of millions of dollars in potential health care investment in Iowa, cost providers tens of thousands of dollars, and significantly delayed critical expansions in the health care industry, a new report by Americans for Prosperity Foundation finds.

The report, authored by Kevin Schmidt, director of investigations at Americans for Prosperity Foundation, and Thomas Kimbrell, an analyst with AFPF’s Legal and Judicial team, analyzed publicly available data on certificate of need, or CON, in Michigan, South Carolina, Virginia, and Iowa.

CON laws are enforced in 35 states and Washington, D.C. They forbid providers from making investments in health care without first gaining permission from the government. Predictably, these laws make quality, affordable care more difficult to access.

The report found that in Iowa:

  • The State Health Facilities Council denied over $250 million worth of investment in health care from July 2016 to February 2020.
  • Providers spent on average nearly $16,000 per CON application, not including fees for attorneys and consultants.
  • It can take up to two years for the government to make an up-or-down decision on a provider’s CON permit.
Opinion: Iowa patients are suffering under our certificate-of-need regime

AFPF-Iowa State Director Drew Klein took to the editorial pages of the Des Moines register to talk about the implications of the CON report for Iowa health care. Read the op-ed.

CON produces health care tragedies

CON has real consequences for patients, who end up having less access to the care they need.

In 2015, Strategic Behavioral Health applied for a CON permit to construct a new hospital in Bettendorf. Two competing providers objected during the approval process, arguing that there was no need for a 72-bed mental health facility.

Yet a few years earlier, these same two providers had funded a report arguing that the Iowa mental health system’s need for inpatient care “has gone largely unmet.”

No matter. The construction of the new hospital was delayed five years.

A report by the Goldwater Institute recounted the story of a mental health patient who, unable to find a bed at a mental health facility in Iowa, was instead incarcerated by law enforcement for a crime for which, as the judge later noted, he was not criminally responsible due to this condition.

“He needed treatment, not punishment,” the judge said.

“We found tragedies in each of the four states we examined,” Schmidt said.

“In Michigan, children across the state, some with severe and dangerous mental health disorders, are ‘stacked up’ in emergency rooms for days to weeks while waiting for psychiatric care beds to become available.”

Often, CON allows special interests to game the approval process to protect themselves from competition, according to the report.

As former Iowa Governor Terry Branstad remarked,

“The certificate of need idea was created to prevent duplication and control the costs of health care. Unfortunately, it has become a way for certain [organizations] to keep out competition.”

Certificate-of-need laws are costly to providers and patients

“CON fees vary widely across states,” said Kimbrell. “In some states, such as Maine, CON application fees are in the six figures. States like Iowa set the fee as a percentage of the proposed project cost.”

In other words, the larger the investment in improving health care access, the higher the project cost.

These figures do not account for the providers who would have submitted applications for new investments but for the CON permit’s byzantine approval process. And there are other hidden costs of CON.

As Schmidt put it:

“There is another untold story about the monetary cost to health care providers we could not quantify: the cost for legal representation, public relations firms, and internal time lost that could be dedicated to serving patients. While larger firms likely have legal and public relations capabilities in-house or can afford external vendors, smaller players can be left to navigate this complicated and fraught process on their own.”

What does Iowa’s report show us?

Without CON, according to a Mercatus Center report, Iowa would have 51 more hospitals — 30 of which would serve rural areas — and four additional ambulatory surgery centers.

CON also worsens Iowa’s mortality rate, with medical complications ranging from heart failure to pneumonia.

Kimbrell emphasized a key point about CON laws:

“This is about more than lost investment, growth, and jobs, although all three of those things are important. It’s about how these laws detrimentally affect health care outcomes for Americans.”

On March 17, as COVID-19 began to spread rapidly throughout the United States, Governor Kim Reynolds issued an emergency executive order suspending CON laws on hospital beds, recognizing that these restrictions would weaken the state’s response to the pandemic.

Iowa’s CON laws restrict Iowans’ access to health care and divert providers’ attention from protecting patients’ health to protecting themselves from competition,” the report concludes. “In short, CON hurts people.”

Read AFP Foundation's new report, Permission to Care, which reveals the truth about how certificate of need hurts patients' health care

Read the full report here.