Georgia’s Healthcare Competitiveness Hobbled by Certificate of Need

By Chris Denson

When assessing Georgia’s competitiveness with neighboring states, Florida and Tennessee are often positioned as the ideal because neither has a state income tax. Another area in which Georgia lags  behind those same neighbors, unfortunately, is in healthcare – specifically, because of this state’s restrictive certificate-of-need laws.

Certificate-of-need (CON) laws determine whether a new healthcare facility, such as a hospital, is allowed to open or expand. The applicant must demonstrate a community need. Almost certainly, competitors will file opposition to the application. The process is often time-consuming and expensive and more often than not results in the status quo, leaving patients without additional choices.

States as politically diverse as Texas and California have eliminated CON, and both Florida and Tennessee have taken recent action to address their regulations.

In 2019, Florida passed legislation that repealed significant portions of its CON law over a two-year period, including restrictions on hospitals. Only nursing homes, hospice care and intermediate care facilities for the developmentally disabled are now subject to approval by the state.

In May of this year, Tennessee legislators acted to ease restrictions around their state’s CON law.

The opposition to repealing or loosening CON restrictions is based on the argument that repealing or loosening CON restrictions would shut down rural hospitals. Interestingly, Tennessee’s legislators cited the closures of rural hospitals in many of their communities as the motivation behind their legislation.

As a result, CON was eliminated for all Tennessee counties designated economically distressed and currently lacking a hospital: Eliminating barriers to entry was considered vital for creating sustainable healthcare and jobs in these communities.

Meanwhile, a study by the Mercatus Center at George Mason University projects that Georgia would gain at least 25 rural hospitals if CON were repealed.

Recognizing how competitors use this system to slow down the process, Tennessee also sought to streamline the procedure for CON application. No longer will simply filing an opposition be justification for a denial, and the state must complete its review of any CON application within 30 days.

Just such a scenario played out in Southwest Georgia, where one hospital system operates all the hospitals in the region. When Lee County officials sought to open their own community hospital – in a county which does not have one – they were met with opposition from the neighboring system and its political allies.

Just this week (July 13), Lee County officials announced they had requested an extension from the state for their CON application as part of the process to build a hospital that began in 2017. 

When the COVID-19 pandemic ravaged Southwest Georgia, an additional healthcare facility appeared to be sorely needed:  The state was forced to spend millions to reopen a hospital that the system itself had closed years earlier.

It is apparent CON has become a vehicle for hospitals and health systems to protect themselves from competition at the expense of patients.

CON law in Georgia is not only preventing the expansion of healthcare, it is also impacting current investment. Earlier this year, the country’s largest hospital company, HCA Healthcare, announced it would be selling at least five of its current Georgia hospitals. While the overall good of for-profit healthcare may be debated, when the CFO of a publicly traded company announces it will focus instead on expansion in Florida and other non-CON states, it reflects poorly on the “business-ready” state of Georgia .

In another promising move, Tennessee voted to repeal any CON required to establish mental health hospitals or initiate psychiatric services. Georgia policymakers have noted addressing the behavioral health system in the state remains a priority.

Wait times for behavioral health services continue to grow, further straining health systems and law enforcement officials inadequately equipped to handle these patients. It is vital that Georgia expedites the infrastructure needed to combat this growing crisis.

To their credit, Georgia policymakers have also enacted similar policies in recent years. In 2018, Georgia added the concept of a “micro-hospital” into state law; Florida followed in 2019. These micro-hospitals typically have 10 beds and include an emergency room, imaging and ancillary services that best fit the community’s needs.

Tennessee’s new law requires that opposition filings must be from healthcare facilities within a 35-mile radius of a proposed project. While Georgia legislators added this provision back in 2019, its enforcement by the state agency in charge since then has left much to be desired.

For business-friendly, patient-friendly reforms that help Georgia level the playing field and close the healthcare competitive gap with our neighbors to the north and south, there are few easier targets for policymakers than this state’s outdated, unfair and abused certificate-of-need regulations

Chris Denson is the Director of Policy and Research of the Georgia Public Policy Foundation. Established in 1991, the Foundation is a trusted, independent resource for voters and elected officials. The Foundation provides actionable solutions to real-life problems by bringing people together. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (July 15, 2021). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.