Would you believe me if I told you there are laws on the books in states like Tennessee that limit health care facility expansion and create barriers to entry for new startups to gain access to the marketplace? Certificate of need (CON) laws are outdated laws that require health care facilities to prove to the state government that there is need in the marketplace before they are able to proceed with an expansion, or even enter into the marketplace to begin with.
The high costs of CON and time-consuming paperwork to apply for CON licensure are outrageous. The minimum cost of a CON application in Tennessee is $15,000, while the application process can take 60 days. If this isn’t enough to deter from expanding or establishing a new health care facility in Tennessee, draconian CON laws also allow existing providers to argue that new or more services are not needed. Some providers even try to argue that CON laws are in place to protect patient interests. But in the Volunteer State, CON laws are protecting health care industry leaders to the detriment of patients and would-be competitors.
An example of these laws at work was the recent CON application denial of Vanderbilt University Medical Center’s proposed 48-bed facility in Murfreesboro, Tennessee. Vanderbilt and St. Thomas, a smaller satellite facility, were required to present arguments to the state board for approval to open similar facilities across the street from one another. The state had the ultimate decision-making power and went with St. Thomas. It is bewildering that government is able to pick and choose winners and losers as blatantly as CON allows them to do. Health care is an extremely personal decision, which is why Tennessee communities and patients should be making these decisions, not unelected bureaucrats.
Another fallacy regarding CON laws that supporters almost always claim is the intent to lower health care costs. This couldn’t be further from the truth when it comes to the real outcomes of this antiquated policy. States that enforce CON have health care costs that are 11 percent more expensive than those that don’t. The reality is that CON laws create monopolistic practices, do not help patients, and should be repealed immediately.
Not only are these laws creating higher health care costs, they are harming vulnerable populations as well. Rural populations are hit the hardest when it comes to CON laws. Rural states operating with CON have 13 percent fewer hospitals per capita than rural states operating without CON laws on the books. Similarly, rural communities in states with CON laws have higher levels of Medicare spending per beneficiary, ambulance utilization, and emergency room use.
Let it be known that Tennessee temporarily repealed CON during the height of the COVID-19 pandemic, to better allow health care facilities to meet the needs of patients, provide better care, and allow more access to protective equipment. If the Volunteer State removed CON laws during the worst health care crisis in our lifetime, doesn’t this beg the question: Why are they needed at all? CON laws undermine patient choice, deter competition, and discourage new technological advancements.
If the high costs, barriers to entry, crony practices, and limited access for patients isn’t enough to make Tennessee consider repealing these laws permanently, then the state legislature should reform the policy to only impact large and expansive projects.
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.