Monday, March 24, 2008

The CON Con

Certificate of Need (CON) is the governmental regulatory program under which providers of health services – mainly hospitals - must obtain permission in order to undertake a capital project such as the construction of a new facility or the purchase of a major equipment item. CON programs are at the state level. The first CON law was enacted by the State of New York in 1964. The CON approach was adopted as national policy during the administration of President Richard Nixon, later to be repealed under President Ronald Reagan. It is currently effective in 26 states.

At the time CON came into being, health care was thought of as ministry, not business. There was concern that providers, motivated by competitive considerations, were duplicating each other’s facilities or services, thereby wasting scarce public resources.

Earlier this year, the Alabama Policy Institute published a report of its study of the application of CON and came to four major conclusions\;

- There is no evidence that CON reduces the cost of health care and some evidence that it increases cost.
- CON reduces choice and stifles innovation.
- CON imposes limits on whether and how existing providers serve their communities; e.g., by slowing the ability to provide facilities in growing neighborhoods.
- CON invites corruption. Providers wanting to build or to prevent others from building are tempted to illicit methods for influencing those with authority to grant or withhold permissions.

Alabama is one of the states with CON and, based on the above, the Institute recommends that its existing CON law be repealed.

It might be thought that providers would object to restrictive regulation of this sort. It turns out, however, that when attempts are made to repeal CON laws, providers are the primary opponents – one supposes because they value the protection against competition that CON regulation provides. However, they no doubt base their arguments on the supposed cost saving that CON laws were enacted to achieve.

You might call that the CON con.

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