Mercatus Study Finds Dire Consequences to Georgia CON Program

GEORGIA PUBLIC POLICY FOUNDATION NEWS RELEASE
For Immediate Release March 31, 2015

Contact Benita Dodd at 404-256-4050 or benitadodd@georgiapolicy.org

Mercatus Study Finds Dire Consequences to Georgia CON Program

Atlanta – Since 1979, Georgia has been one of 36 states and the District of Columbia to restrict the supply of health care through certificate-of-need (CON) programs that limit entry or expansion of health facilities, traditionally justified with the claim that they reduce and control health care costs.

A study released today by the Mercatus Center at George Mason University, however, finds serious consequences for continuing to enforce CON regulations, which restrict competition and choice.

It reports that Georgia’s CON program is the 18th most restrictive in the nation, with 17 devices and services – including acute hospital beds, positron emission tomography (PET) scanners and open heart surgery – requiring a certificate of need from the state before the device may be purchased or the service offered.

The program, which Georgia and many states also justify as a way to cross-subsidize health care for the poor, could mean more than 13,000 few hospital beds in Georgia, 20-40 fewer hospitals offering magnetic resonance imaging (MRI) services and 50-71 fewer hospitals offering computed tomography (CT) scans, the researchers report.

The theory behind CON laws, which are specifically designed to limit the supply of health care, is that by restricting market entry and expansion, states will reduce overinvestment in facilities and equipment. In addition, “charity care” provisions typically require providers that receive a certificate of need to increase the amount of care they provide to the poor. But the data show there is no relationship between certificates of need and the level of charity care.

CON restrictions are in addition to the standard licensing and training requirements for medical professionals, “but are neither designed nor intended to ensure public health or ensure that medical professionals have the necessary qualifications to do their jobs,” the researchers note.

“These programs intend to create quid pro quo arrangements: State governments restrict competition, increasing the cost of health care for some, and in return medical providers use these contrived profits to increase the care they provide to the poor,” according to the Mercatus report. “However, these claimed benefits have failed to materialize as intended.”

“For policy-makers in Georgia, this situation presents an opportunity to reverse course and open the market for greater entry, more competition and, ultimately, more options for those seeking care,” the researchers conclude.

“For more than 20 years, the Georgia Public Policy Foundation has expressed concerns about Georgia’s CON program, and the Mercatus report highlights an ongoing hurdle,” said Foundation President Kelly McCutchen.

“In 2007, we warned that CON rules are inefficient and expensive – and that, ‘only when the majority of health coverage is consumer-driven, and there is transparency of cost and quality, will the market will be able to control cost.’

“That holds true today: Georgia needs a comprehensive reform of health care policy, and certificate of need should be part of that discussion.”

The study, “Certificate-of-Need Laws: Implications for Georgia,” was conducted by Christopher Koopman, Thomas Stratmann and Mohamad Elbarasse of the Mercatus Center at George Mason University and can be accessed here.

About the Georgia Public Policy Foundation: Established in 1991, the Foundation is an independent, state-focused think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Visit our Web site at georgiapolicy.org.

 

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