Tennessee Should Consider Certificate of Need Reform in 2021

Posted: Jan 19, 2021 11:27 AM
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Tennessee Should Consider Certificate of Need Reform in 2021

Source: U.S. Navy photo by Mass Communication Specialist 2nd Class Erwin Jacob Miciano

Last session, the Tennessee General Assembly introduced legislation that would dramatically reform Certificate of Need (CON) laws within the state for health care facilities. Supporters of these reforms understand that CON laws are protectionist policies put in place to limit competition and stifle innovation. CON has been responsible for creating monopolies in the medical marketplace resulting in higher prices and less access for patients. 

A recent study from the Kaiser Family Foundation found that health care costs are 11 percent higher in CON states than in non-CON states. The study also found a positive correlation between the number of CON law restrictions and the cost of health care. States requiring certificates of need on 10 or more services averaged per capita health care costs 8 percent higher than the $6,837 average for states requiring certificates of need for fewer than 10 services. 

Regardless of these statistics, The Williamson County Board of Commissioners filed a resolution in December in opposition to reform CON. The argument was focused on the fact that the medical industry is highly regulated by state/federal governments and insurance companies; adjusting that framework partially with a free market reform would inherently impact the market. 

Of course, community hospitals that are already established don’t want to compete—look to any business model in any industry. If you could merely wave a magic CON wand and never fear competition again, your business would be very advantageous for you… but what about the patients? 

The resolution states, “Allowing the Health Services and Development Agency to expire will threaten the financial viability of community hospitals…” The only reason this would be the case is because a better option became available to patients, by removing overregulated policy that protects existing industry. CON laws are inherently anti-competitive and breed cronyism.  

As a result, these overreaching laws have dramatically increased medical costs by inhibiting new providers from competing with existing hospitals. The “unintended consequences” of CON are impacting patients and Tennessee is the 7th most restrictive state in the country. According to a recent study from the Mercatus Center, if Tennessee operated without CON laws, the state would have 63 additional health care facilities, 26 additional ambulatory surgery centers, and 25 additional rural hospitals. 

As the 2021 legislative session approaches, Tennessee lawmakers should consider reforms that make patient centered health care a priority.

CON laws are outdated and burdensome. The state’s CON program is not beneficial to patients because it perpetuates monopolistic practices and limits competition in the marketplace.

The health care industry is no exception to the rule that free market practices benefit the consumer. Individual lives have been improved because of competition and innovations within the marketplace. American enterprise should be treasured. Technological advancements make our lives better, and in this case can even save lives if only government would get out of the way. 

Christina Herrin (cherrin@heartland.org) is the government relations manager at The Heartland Institute, a nonpartisan, free-market think tank headquartered in Arlington Heights, Ill.