'Certificate of need’ laws are certifiably unnecessary

by Malia Blom Hill, The Hill, 11/27/17

Political rhetoric aside, there are few, if any, politicians who favor taking health care access away from American citizens — especially as we are reminded (again and again) that there is an important distinction between health insurance and health care access.

Certainly no politicians would want to get caught saying they supported limiting the number of  hospitals, dialysis facilities or MRI machines for rural areas.

And yet, that’s exactly what dozens of states legislatures have done through the passage of so-called certificate-of-need laws. 

In Hawaii, the reality of limited health care is that you might find yourself on a plane flying from one of the outer islands to the main island of Oahu, hoping and praying you or your loved one can get to a Honolulu hospital before it’s too late.

So you would think access to care on the outer islands would be a priority. This is, after all, a state that enacted strict employer health insurance laws long before the federal Affordable Care Act was a twinkle in President Obama’s eye. And this is the same state legislature that — faced with the possibility that Congress might repeal or replace the ACA — considered adopting most of it as state law.

But for all the concern about health insurance, the state has failed miserably when it comes to health care access.

In 2006, Malulani Health and Medical Center submitted a Certificate of Need (CON) application to build what would have become Maui’s second full-service hospital. The only other hospital was the state-run Maui Memorial Hospital, which badly needed renovation and was unable to handle serious medical issues like premature infants or cardiac cases (which were flown to Honolulu).

“Approximately 50 percent of all our off-island transports per month are cardiac related cases,” one doctor reported. “I believe that we probably transfer more than 350 cardiac cases per year off-island due to lack of available services (on Maui).”

But the state Department of Health denied Malulani Health’s CON application, citing concerns that a new hospital would negatively affect Maui Memorial Hospital.

In theory, certificate-of-need laws control health care costs and avoid wasted resources by forcing applicants to prove that the community “needs” the new service or facility. An extra hurdle allows existing providers to challenge a prospective new provider’s application.

This works about as well as it sounds. It’s why we don’t ask McDonald’s if it’s okay for Wendy’s or Burger King restaurants to open up nearby. 

There are 29 services that require a CON in Hawaii, including ultrasounds, MRIs, open-heart surgery, hospice, dialysis, neonatal intensive care, organ transplants, and obstetrics services. Not surprisingly, these services often overlap with areas that are underserved in the state. 

For example, the Honolulu Star-Advertiser recently reported on the urgent need for dialysis facilities, as the number of new dialysis patients in Hawaii every year has been increasing more than the national average.  

The lack of facilities is a major hardship for patients, but the Department of Health hasn’t been able to clear the certification backlog in a timely way, despite the very obvious need. One industry representative said that between getting a facility built, demonstrating its need and getting certified, it can take up to five years before patients can start receiving help.

State Rep. John Mizuno used the opening of a new facility to call for an expedited approval process for dialysis clinics. His statement underlined the absurd results of the CON regulations. "New clinics with new equipment needlessly stand idle, not being able to serve thousands of dialysis patients in Hawaii, while patients scurry to clinics located many miles away from their homes, sometimes from opposite sides of the island," Mizuno said.

According to the Mercatus Center at George Mason University, CON laws have actually had the opposite effect than what was intended. Instead of saving money, they’re associated with higher health care spending. Mercatus estimates that per capita annual spending in Hawaii would drop $219 without CON laws.

When it comes to access, CON laws are especially problematic for rural areas. States with CON programs have fewer hospitals in general and fewer rural facilities in particular. Without CON regulations, access to health care facilities in Hawaii would likely increase by about one-third.

Supporters of CON laws argue that the regulations help ensure high-quality care. But again, the data doesn’t support their claim. In states with just one CON law, indicators of health care quality (e.g. mortality rates for heart attack, pneumonia, and heart failure) are on par — or even slightly worse — than states without CON laws.

And there may be a cumulative quality dip with more CON laws. In states with four or more CON restrictions (like Hawaii), hospitals appear consistently to be of lower quality, scoring worse on the mortality indicators as well as readmission rates and patient surveys.

Hawaii is not the only state that has allowed regulation to hurt health care access. There are 31 other states that have four or more CON restrictions, delaying needed facilities and eroding the quality of care available.

There seems to be a conviction, both in Congress and in state legislatures across the country, that our nation’s health care crisis can be solved by passing more laws. But as the negative effects of the CON laws demonstrate, more regulation isn’t the answer.

When policymakers talk about barriers to health care access, they should start by looking at the ones they erected themselves.

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Malia Blom Hill is the policy director of the Grassroot Institute of Hawaii (@GrassrootHawaii), a public policy think tank dedicated to the principles of individual liberty, free markets and limited, accountable government