In Maine, medical providers like hospitals, out-patient facilities and nursing homes must obtain a Certificate of Need (CON) in order to make significant investments in their offerings. This means that certain healthcare providers looking to build a new facility, offer a new service, substantially increase their capacity, purchase equipment or make other critical investments must seek approval from the state—and their competitors.
Yes, you read that right. Under CON, larger, more established hospitals decide how and when to let their competitors into the market, a process known as the “competitors veto.”
According to the Division of Licensing and Certification (DLC), the office that processes CON applications within the Maine Department of Health and Human Services (DHHS), the average CON application takes 8 to 12 weeks to complete. It costs providers $1,000 in fees for every $1 million in proposed expansion, at least $5,000, and up to $250,000 per application. From 2018 to 2020, the average applicant spent nearly $20,000 in fees.
During the state of emergency declared in response to COVID-19, Governor Mills, through an executive order, allowed DLC to expedite the process. In that time, 11 emergency CON applications were each approved within a week.
Certificate of Need is an idea that has been around for decades. New York passed the first program in 1964. Ten years later, Congress tied funding for certain programs to an implementation of CON requirements. Maine enacted its law in 1978. Just 8 years later, the feds repealed the mandate, leading many states to ditch CON too.
Despite considerable research showing the program contributes to less competition and higher costs, 39 states plus the District of Columbia still require a CON for healthcare facilities and/or ambulance services. Even after a considerable effort to ensure hospital and nursing home bed capacity amid the coronavirus pandemic, the inertia of this failed policy continues to haunt rural communities.
The original rationale for CON was that it would ultimately reduce healthcare costs by limiting the amount of care offered that was beyond the need of the community. Larger hospitals, which can operate at more efficient scale, would be better suited to determine the extent a newly-offered service would affect the price of care.
As Matthew D. Mitchell wrote for Managed Healthcare Executive in 2019, “CON might cause more procedures to be channeled through fewer providers, allowing those providers to improve their proficiency. While not unreasonable, the idea must be weighed against another, well-supported proposition: that competition tends to elevate quality.”
The detrimental effects of CON on competition in health care services was cited by the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice in 2016, noting that “CON laws raise considerable competitive concerns and generally do not appear to have achieved their intended benefits for health care consumers.”
Mercatus Center researchers found that hospitals in non-CON states have significantly lower mortality rates for pneumonia, heart failure, and heart attack. These hospitals also have lower readmission rates for heart failure and heart attack, and their patients are more likely to have a pleasant hospital experience.
Mitchell notes that there is no higher rate of charity care in states with CON laws, but worse racial disparity in access to care exists in CON states versus non-CON states. In fact, those states see worse outcomes in access to care than non-CON states. A 2009 study found that after New Jersey completed a reform of its CON process, the number of facilities offering access to cardiac angiography, a procedure using X-rays to view blood flow, grew, and with that, competition for customers. Broader availability led to an increase in the proportion of Black patients seeking care.
Some states, like Maine, require a CON for ambulatory surgical centers (ASCs). ASCs are a type of out-patient center which performs surgeries and other procedures, separate from a hospital. Research shows that when CON is required for ASCs, there are 13% fewer ASCs per rural resident. CON laws are also generally associated with 30% fewer hospitals per rural resident as well.
What benefit does this provide for patients? Basic economics tells us that restricting supply will drive up prices. Restricting competition, another foundational aspect of CON, further exacerbates these issues, leading to worse outcomes for the economically disadvantaged.
Clearly, the goals of CON laws have not borne out in reality, and this is especially true for rural communities. Looking at this issue in the shadow of a global pandemic, one which demanded our daily attention for more than a year, maintaining the outdated and onerous Certificate of Need process seems especially absurd. This year, the Maine Legislature should eliminate this needless mandate in its entirety.
