Clarity in the need to repeal Certificate of Need laws

Clarity from leaders is a wonderful thing. It shows they know what they want to do, and that they have the courage of their convictions to explain it plainly.

Clarity is evident in the final report of the Georgia Senate’s Study Committee on Certificate of Need Reform, chaired by Sen. Greg Dolezal, R-Cumming. The directive is short and sweet: “the Study Committee recommends that Georgia’s CON laws should be repealed in their entirety.”


Similarly clear is the committee’s concise summary of its findings justifying that recommendation:

“Based upon the testimony, research presented, and information received, the (committee) has found that the problem which Georgia’s CON laws were intended to combat no longer exists. The CON process is used by market incumbents to prevent competition and deny patients the benefits therefrom. The CON laws prevent the citizens of Georgia from benefiting from advances in health care delivery, especially in rural communities.”

Amen to all that, too.

Let’s go through those findings. But first, for those who need a refresher: CON laws require state approval for various types of healthcare facilities, equipment and services. They also give existing providers a “competitor’s veto”: They can object to a CON application, effectively turning it into a lawsuit – making it costlier and more time-consuming to pursue, and ultimately more likely to be rejected.

These laws block not only new hospitals from being built, but new surgery centers, imaging centers, childbirth facilities and others. In a state where access to care is lacking, these laws stand in the way of making care more accessible and affordable.Given all that, what exactly was the problem CON laws were supposed to address, and why does it no longer exist?

State CON laws came from a federal mandate in the 1970s. At the time, Washington largely picked up the tab for new hospital facilities and pricey medical equipment, and it wanted to ensure it was spending tax dollars wisely. Officials also worried that more facilities would lead to more care being provided unnecessarily – that “in an insured population, a hospital bed built is a hospital bed filled.”

But that’s not how we finance new healthcare facilities anymore, and Congress repealed its mandate for states to have CON laws in 1986. Yet, most states still maintain these laws.

So the problem CON laws were meant to solve no longer plagues us. Today, private capital backs most proposed new facilities. Why not let investors invest? 

Defenders of CON laws like to say the healthcare industry is different from others, that it wouldn’t be economically viable for hospitals and other providers to compete with one another rather than focusing on their patients. But the only reason this even seems true is the existence of CON laws.

If any other industry had laws protecting its members from new entrants, that industry, too, would argue that its economics didn’t allow for more providers. It might even adopt some of the same practices – such as opaque pricing and aggressive vertical consolidation – that make healthcare appear to be a vulnerable industry. The arguments in defense of CON are circular.

All of this denies patients the benefits of healthcare advances, particularly in rural communities. It has become so expensive and time-consuming to file a CON application that the bar for even trying to build something new has become too high. Rural communities don’t offer the critical mass of potential patients to make an application worth the risk. And it’s not as if CON laws have prevented a spate of rural hospital closings over the past decade-plus.

So, rather than protecting what rural communities have, CON laws mostly just make it less likely they’ll get anything new.

The Senate passed a modest CON repeal bill earlier this year, only to see it idle in the House. The House also has a CON study committee this year, and its report is due soon. If it has the same inspired clarity as the Senate’s report, Georgia patients may finally get some new options.

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