Tennessee reforms burdensome Certificate of Need laws

The COVID-19 pandemic has caused Americans to rethink many processes and practices, especially regarding health care.  One hot topic that has been brought into question is the necessity of certificate of need (CON) laws.

These laws require health care facilities or providers to get permission from the state to build new facilities or expand existing operations.  Among the many problems with these laws is that they are expensive and time-consuming, deter innovation, increase health care costs, and reduce health care access.

Furthermore, CON laws are rife with cronyism.  When existing health care providers don't want competition, they often influence the CON application process to limit entrance of would-be competitors into the medical marketplace.

What's more, during the pandemic, 20 states that enforce CON laws temporarily suspended them.

The Tennessee General Assembly recently passed a bill that would reform the antiquated CON laws currently enforced in the Volunteer State.  As of this writing, the bill awaits the governor's signature.

States with CON programs regulate on average 14 medical services, devices, and procedures.  Tennessee regulates 23, much higher than the national average.

Writing for the Beacon Center, Lindsay Boyd Killen explains why certificate of need laws in Tennessee should be reformed.  "The only irrefutable achievement we can directly attribute to CON laws is their successful creation of a robust hospital cartel that restricts competition in the marketplace and decreases the supply of healthcare services.  That's not something to be proud of."

The new bill would reform many aspects of the outmoded policy by rolling back some regulations for certain mental health facilities.  However, it would also increase costs for hospitals.  The bill would reduce annual fees for nursing homes, ambulatory surgical centers, and home care organizations.  The bill would also shorten the lengthy CON approval process.

The proof is in the pudding.  Research shows that states with CON have higher costs and fewer hospitals and health facilities.  If Tennessee lawmakers repealed the state's CON laws entirely, total health care costs could drop by $223 per person in the Volunteer State.  If CON were eliminated completely, Tennessee could have an additional 63 hospitals and 26 more ambulatory surgery centers.

These arbitrary laws do nothing but hamper innovation within the medical marketplace and limit options for patients.  CON laws create a conflict of interest that suppresses the health care marketplace.  A study from the National Institute for Health Care Reform found that "in five of six states studied, the CON approval process can be highly subjective and tends to be influenced heavily by political relationships rather than policy objectives."

Without question, CON laws in Tennessee cost patients more than just money.  They also impair access to quality health care and discourage health care innovation.

If legislators support reforming these burdensome laws because of the negative impacts on constituents, they should support a full CON repeal effort. the bill passed in the Tennessee General Assembly contains several important reforms other states should duplicate.  However, it is far from perfect.

It is time to do away with CON laws once and for all.  Yet we must remember that this is just a part of the greater health care reform effort that we desperately need.

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

Image: Pixabay.

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