Why do we have so few providers in healthcare?

Access to healthcare remains one of America’s most debated topics. As with too many other topics, the debate tends to focus on symptoms rather than the root cause of the problem.

The healthcare debate has long started with the symptom of high prices and focused on the question of who ought to pay them: the patient, through some type of private health insurance, or the taxpayer, by subsidizing care through an arrangement run by the government. Ideological positions have been established and partisans have dug in.

The way out of this stalemate is to focus instead on why healthcare prices are so high – not who pays these inflated figures. The argument we ought to be having is about why we have so few providers of healthcare, and how this allows them to charge those higher prices in the first place.

There are many facets to this issue, from medical training and licensing to price transparency. But a common thread is the fact that in many states, including Georgia, the government actively works with existing providers to make it as difficult as possible for new services to be offered.

Anyone who isn’t a C-suite hospital executive should be offended by this system. It limits the choices of patients and healthcare workers, stunts the growth of markets for innovative medical devices and other breakthroughs, pits communities that want new healthcare services against neighbors that have them, and generally distorts the market in myriad ways. It drives up the cost of private health insurance as well as taxpayer-funded programs – and virtually guarantees that none of the policy options we debate, about paying for healthcare, stands a chance of controlling costs.

This system even has a name that sounds as esoteric and innocuous as its beneficiaries would like you to believe it is: “certificate of need.”

The only “need” truly served by this system is the “need” of monopolistic healthcare providers to continue avoiding competition and setting prices as they wish.

About a third of Americans live in a state with no CON requirements, and it isn’t a matter of partisanship: CON has been repealed fully or in part in states ranging from California to Texas, from Florida to Pennsylvania. Most recently, neighboring South Carolina eliminated CON requirements for most healthcare services. Nor should it be partisan, as there’s no reason for liberals or conservatives to support a system that allows corporations to avoid competition.

My organization recently published the definitive history of CON in Georgia and overview of the nationwide economic literature about it. Here are some clear findings based on the facts:

  • Despite a common argument that CON protects financially struggling rural hospitals, “no researchers have found any correlation between rural hospital closures and reduced CON regulation.”
  • Despite a common (if completely counterintuitive) argument that CON, which inhibits supply, somehow keeps prices under control, only 13% of empirical tests examining spending found CON was associated with lower healthcare spending. Sixty percent found it was associated with higher spending (the rest found insignificant or negligible effects).
  • Regarding access to healthcare, only 8% of tests found CON was associated with greater access, while 55% found it was associated with less access. This includes reduced access in CON states to hospitals, surgery centers and services ranging from cardiology to psychiatry.
  • The same percentages applied to quality of care: 8% found CON was associated with higher quality of care, while 55% found it was associated with lower quality.
  • Most stunning, not a single test found CON was associated with better health outcomes for underserved populations, whether rural or economically depressed. Eighty percent found it was associated with worse outcomes.

The General Assembly debated but did not pass legislation this year regarding CON. Both the state House and the Senate authorized study committees to examine the issue before 2024. If they follow the facts, the direction for them to pursue next year will be perfectly clear.

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