CON orders: the way to healthcare monopoly?

26 June 2017 (Last Updated November 22nd, 2018 11:32)

Passed almost 50 years ago, old laws to improve patient access in the US might now be increasing healthcare costs unnecessarily.

CON orders: the way to healthcare monopoly?

Passed almost 50 years ago, old laws to improve patient access in the US might now be increasing healthcare costs unnecessarily.

Reform of such laws is resisted by healthcare providers, represented by lobbying organisations. With Tom Price, a former orthopedic surgeon from Georgia, appointed as Secretary of the Department of Health and Human Services, reform of State healthcare laws is likely to return to the agenda as part of Obamacare repeal.

There are 35 states in the US where a certificate of need (CON) is currently necessary to create a medical facility. An older law, brought into existence by the Nixon administration, requires a CON before any construction or expansion can be undertaken. States with the CON law also have their services and medical device installations regulated. This creates a limit on healthcare supply by the bureaucracy where, if they do not determine a 'need' for specific services, a CON application will not be approved. The bureaucracy is affected by the large hospital association lobbyistsm to limit competition and create healthcare monopolies.

The conversation begins with the constant struggle between Republicans and Democrats to pass laws that are favourable to their respective strategic plans and constituents. Lobbying within the political system may seem dubious to a layman, however, it is a perfectly legal way to sway opposing parties. CON commissions are formed throughout varying states and the members are appointed by the governor. For example, Michigan State has 11 commission members, six Republicans, and five Democrats. These are each responsible for a specific healthcare sector and each tries to deliver services based on constituents’ needs. Conversely, associations such as the American Hospital Association are resistant to change and want to protect their interests.

Having an old, outdated law controlling the healthcare infrastructure of many states creates higher prices for patients and creates barriers for practicing physicians unable to compete with large hospital organisations. In addition, hospital organisations have an inherent advantage within the market and spend millions of dollars to block reform by lobbying state legislators.

The American Hospital Association argues that CON laws control costs and improve access to care for individuals. However, a study conducted by the Mercatus Center outlines lower quality of care within CON states and fewer hospital beds when compared with states without CON laws. The Mercatus Center found that across the US, there is an average of six hospitals offering MRI services per 500,000 people. In states such as Virginia, where MRI machines are covered by CON laws, the number of hospitals that offer MRI services is 2.5 per 500,000 persons, translating to Virginia having approximately 41 fewer hospitals offering MRI services than the expected average for its population.

CON laws decrease the availability of health services by limiting entry and competition and do nothing to decrease the cost of health services. Programmes such as these play a major role in the disarray of the healthcare system in the US. When the infrastructure is affected by large organisations and competition is limited, the conversation must shift towards the outcomes felt by patients.

CON laws need to be phased out and a new regulation needs to be forged to provide better care for the US citizens, with a better foundation that promotes competition and better quality of care for patients.