There is no hospital shortage in America. Only competition shortages.
America has a spending problem disguised as a healthcare problem.
Healthcare now consumes nearly one out of every five dollars in the American economy, and not because we’re the healthiest nation on earth. For most families and patients, that figure lands not as a statistic but as a bill that is often incomprehensible, occasionally ruinous, and always opaque.
At the center of this cost crisis sits a sector that has quietly amassed extraordinary pricing power: America’s hospital systems. But here’s what too few are saying: government policy helped build this monopoly, and government policy is actively keeping it in place.
Over the past two decades, hospital prices have more than doubled — rising over 220 percent since 2000, outpacing inflation, wage growth, and every other metric you can name. But it’s not because of medical breakthroughs or an aging population. It’s the predictable outcome of consolidation and regulatory capture. In community after community, independent hospitals have vanished into sprawling systems.
In many metro areas, one or two networks control the majority of inpatient beds and specialist practices. When competition disappears because of government policies, prices rise — and patients have nowhere else to go.
The conventional response is to demand Washington and its agencies force some antitrust action or payment reforms. And those instincts aren’t wrong. But they miss the more fundamental problem: in most states, the government has built legal walls preventing new competition from ever entering, known as Certificate of Need (CON) laws. These rules grant hospitals essential veto power over any new competitors near them, limiting competition and keeping costs high.
In 35 states, CON laws require new hospitals, surgical centers, and imaging facilities to receive government stamps of approval before opening. On paper, this sounds like prudent planning. In practice, it’s a competitor’s veto supported by the system. We know it’s true because incumbent hospital systems routinely file legal challenges against rivals seeking to build using CON laws as their legal rationale.
Upstart rural hospitals in states like North Carolina have been routinely victimized by these barriers, and patients are left worse off as a result.
This isn’t a quirk, but rather a system working as designed. CON laws were originally sold as cost-control measures in the 1970s, but they never controlled costs. As these kinds of restrictions normally do, they restrict supply, shield incumbents, and eliminate the competitive pressure forcing prices down. Studies find that patients in CON states pay roughly 11 percent more for care and have access to 30 percent fewer hospitals per capita. That’s a travesty of our own making.
The question isn’t just why hospital prices are so high. It’s why we have laws on the books that make it illegal to compete against the hospitals charging them.
The answer is political. Hospital systems are among the most powerful lobbying forces in state capitals. They claim CON protections ensure access and prevent wasteful duplication. What they actually ensure is that no one builds a better, cheaper option nearby.
Real reform starts by tearing down these anti-competitive barriers. States should repeal CON laws and let new providers enter the market. The fix isn’t more regulation — it’s removing the regulation that created the problem. After CON repeal, studies show surgical centers increase by nearly 50 percent, rural access improves, and the hospital closures incumbents predict simply don’t materialize.
Alongside deregulation, transparency must be enforced, not just requested. The hospitals that receive billions in public funds should be forced to provide actual prices that patients can evaluate. When families can compare costs before choosing, they become genuine consumers, not captive ones.
The same logic applies to mergers. When one system controls a regional market, it should face the same scrutiny as any dominant retailer and submit to the same process like any other business seeking to grow. But that’s not a blank check to dominate using government protection.
America doesn’t have a hospital shortage. It has a competition shortage that is government-mandated. The real reform needed to reduce prices of care isn’t more federal intervention and mandates that will only drive prices higher.
Rather, it’s above removing the barriers that gave dominant systems their power in the first place, putting real prices in front of patients, and letting providers compete for the privilege of serving them. That will enable patients to have more choice and power in a system where they usually have none.
Elizabeth Hicks is the Head of External Affairs at the Consumer Choice Center.