Certificate of Need Laws Hurt GA Healthcare Costs, Choice
By Matt Bolch
Investigative Journalist for the Georgia Public Policy Foundation
Physicians Hugo Ribot Jr. and Malcolm Barfield fought Georgia’s certificate of need law all the way to the state Supreme Court, but the CON won.
“Basically, the Supreme Court punted,” Ribot, co-owner of The Georgia Advanced Surgery Center for Women, says of the 2017 decision.
“From what I could tell from their comments — because we attended [the hearing] — they politically punted and said this was a matter the Legislature should decide. I thought it was a weaselly avoidance of something we thought was constitutionally valid.”
Their battle began in 2015, when the ambulatory surgery center (ASC) applied for a certificate of need to add a second operating room and allow OB/GYNs from other practices to operate there. Three months after the state denied the CON, and supported by the Goldwater Institute free-market advocacy group, the physicians sued the state then appealed the subsequent denial to the state Supreme Court.
Georgia’s CON law requires providers “to obtain permission before they open or expand their practices or purchase certain devices or new technologies. Applicants must prove that the community ‘needs’ the new or expanded service, and existing providers are invited to challenge would-be competitors’ applications.”
In Georgia, the healthcare spending difference because of CON equates to an additional $187 per person.
Other providers can object to a hospital expansion, a new home health agency, new CT scanners or nearly two dozen other categories of healthcare services — and they nearly always do. This delays projects and creates mounds of paperwork and hefty attorney fees. In 2019, the Legislature mandated a 35-mile radius in which where providers can object, but lawmakers continue to ignore the higher healthcare costs in states with CON laws versus those without. In Georgia, the healthcare spending difference equates to an additional $187 per person, with 45% of that being direct physician costs.
“Sadly, it wasn’t a question about quality of care, which is higher, or infection rates and costs, both of which are drastically lower,” Ribot says of their denied expansion. “It’s all about lobbying and who’s the strongest lobby, which of course are hospital lobbyists.”
Simply put, Georgians pay more for healthcare, receive lower-quality care, and are denied freedom of choice because of CON regulations.
A Primer on CON Regulations
Georgia’s CON regulations are some of the nation’s more restrictive, encompassing 22 services that include hospitals/expansions, home health, obstetrics services, imaging modalities, rehabilitation facilities and open-heart surgery services.
New York State was first to enact a CON law governing healthcare, in 1964. In the intervening decade, 10 additional states passed their own regulations. The federal government entered the fray in 1974, passing the National Health Planning and Resources Development Act, an ill-advised push to constrain healthcare costs. By 1987, when the feds repealed their law because the program did not prove cost-effective, Louisiana was the only state without CON regulations.
Led by state hospital associations worried about competition, 35 states and the District of Columbia still have CON laws on the books. Of 35 regulated services, Hawaii takes the most heavy-handed approach, regulating 28. North Carolina regulates 27, and Washington, D.C., regulates 25.
Dr. Brian Hill, partner and practicing physician with Urology Specialists of Atlanta, explains the difference between care in a same-day ambulatory surgery center (ASC) and a hospital this way: “Patients that are hospitalized and sharing the same operating room might have some significant issues with bacterial infections that can get transmitted to the next patient unless stringent cleaning protocols are followed.
“A clean outpatient setting is great for the right surgeries. It’s going to be a cleaner, less risky place for infections and complications,” he says.
Patients in states without CON regulations are 5.7% less likely to die from post-surgical complications and they rate hospitals nearly 5% higher than Georgia patients do, according to the Mercatus Center at George Mason University.
More ASC Use Would Lower Costs
Resurgens Orthopaedics, with 25 locations across metro Atlanta, employs 100 physicians and operates eight ASCs. Under precise conditions, they are not subject to CON laws, explains Dr. John R. Gleason, an orthopedist who was co-president of the medical group before resuming private practice.
ASCs can operate under a letter of non-reviewability (LNR), which confines a surgical center to a single medical group and limits its size. The proposed Cartersville ASC expansion that prompted the Supreme Court case wanted to invite other OB/GYN surgeons to use the facility, which triggers a certificate of need review, even though the facility would have remained single specialty.
“The CON law doesn’t allow for smaller practices to band together to have one surgery center,” Gleason says. “That’s where CON becomes anti-competitive, because it makes it hard for healthcare providers to open facilities that legitimately compete for patients.”
Urology Specialists’ ASC isn’t used full time, but without a CON, the medical group cannot rent out space to other providers to cover some of the facility’s overhead, notes Hill. Would the group consider filing a certificate of need? “Not a snowball’s chance,” Hill replies.
Patients in states without CON regulations are 5.7% less likely to die from post-surgical complications.
“Rates at my ASC are lower than hospital outpatient department rates, and if you’re trying to create a marketplace in healthcare, the best way to do that is to try and make healthcare as affordable as possible, and price matters.”
Temporary Suspension Thwarted
Even during the worst of the pandemic, bureaucrats at the Georgia Department of Community Health (DCH) refused to yield to Gov. Brian Kemp’s March 2020 executive order to suspend CON regulations during the public health emergency.
In the first 45 days after it took effect, 32 unique applications were submitted to DCH, ranging from hospitals to ASCs to home health to rehab centers. Fourteen of those were from ASCs, many seeking to convert existing single-specialty facilities into multi-specialty centers during the pandemic so physicians and patients could utilize their operating rooms for elective surgeries postponed in hospital settings.
Most surgeries can be categorized as “elective,” even many cancer surgeries. How many patients would choose to wait to remove a fast-growing cancer if given the option to have surgery at an ASC?
Despite the obvious and overwhelming need, every ASC application was turned down. A common DCH response was that ASCs had not proven local hospitals could not handle patient loads on their own, this at a time when hospitals were overrun by COVID-19 patients and most were not scheduling elective surgeries.
“I know my patients were extremely relieved when we were discussing surgery during the pandemic, and I said we could do it at the ambulatory surgery center,” says Resurgens orthopedist Chris Walsh.
“The surgery may not have been necessarily emergent, but it wasn’t something they wanted to wait indefinitely for. It frees up the hospital to do the things that are best done there.”
CON Adds Cost, Complication
Over his four decades as an orthopedist, Dr. Jim Scott has seen healthcare from many angles – all of them in Tifton. He’s been in private practice and worked as an employee of Tift Regional Health System after the hospital bought his practice, Georgia Sports Medicine. Now retired from practice, Scott still serves on the board of directors at the health system.
“As a private practice doc, I didn’t like CON at all. I thought it restrained competition,” Scott says.
“I didn’t build an ASC for many years because those hospital administrators were friends. I was in a small community and didn’t want to hurt the hospital or compete with them. But I finally decided to build an ASC because I wanted more control about what happens to my patients in the operating room.”
Tift Regional fought his practice when it wanted to build an ASC. “Yeah, they challenged it, but it wasn’t a bloody fight,” Scott recalls. “Obviously, we won it.”
Scott’s opinion about CON regulations has grown more nuanced since serving on the Tift Regional board: “I look at (CONs), perhaps, as a way of keeping larger entities from encroaching on our area.”
He cites what is now called Atrium Health Navicent, which incorporated in Macon in 1994 and merged with Atrium Health in 2019. It is now Georgia’s fourth-largest hospital by acute-care beds and is collaborating with Emory on its cardiothoracic surgical services.
Certificate of need laws, particularly in rural areas, cause patients to drive farther for imaging
Certificate of Need laws also cause patients, particularly in rural areas, to drive farther for imaging, according to Mercatus.
The gap between the number of ASCs in the country and the number of hospitals has been narrowing in recent years, with about 5,700 ASCs and 6,100 hospitals. The number of surgeries that no longer require an overnight hospital stay has increased, leaving hospitals to care for the sickest and most-complex patients for whom ASCs are not an option.
Imagine a new shoe store that couldn’t open because the other shoe stores in the area thought there were enough stores in the market already, notes Ribot from The Georgia Advanced Surgery Center for Women.
Georgia’s CON laws are similar: “Competitors always let loose their battalion of white shoe law firms that charge $500 an hour to write these 24-page briefs, which they get to present anytime somebody applies for a certificate of need,” Ribot says.
Georgia’s CON laws drive up the cost of healthcare under the guise of protecting health systems, says Resurgens’ Gleason. “I haven’t seen a hospital that takes care of patients. It’s the providers and the nurses and the physicians that take care of the patients. At an ASC, like the ones we have, it’s anywhere from 15% to 50% less expensive than a hospital surgery suite for the same procedure.
“How would that not benefit patients?”