Certificate of Need laws hinder health-care system

  • By John Barnes Guest Editorial
  • Sunday, March 23, 2008 9:19pm

Earlier this year, King County Superior Court Judge Bruce Hilyer handed down a decision that paved the way for Swedish Medical Center to build a hospital in Issaquah. In June, the state then issued a Certificate of Need, or CON, the special permit necessary before medical facilities can be built.

Why are state bureaucrats and judges, instead of doctors and patients, deciding who gets health care and where? Because in Washington it is illegal to open or expand most kinds of medical facilities without state permission.

Administered by the Department of Health, CON is the process whereby the state decides whether, by whom and where medical facilities can be built. It limits the number of hospitals, nursing homes, kidney dialysis and outpatient surgery centers, and more than 10 other services. Washington state adopted these laws in 1972 with the promise they would reduce health-care costs and increase access by preventing excess supply. Twenty-seven years and numerous cost increases later, the laws have failed to achieve any of their goals.

Last year, the Washington Policy Center released an in-depth study of our state’s CON program and the national experience. We recommended the state repeal CON outright or at least scale it back significantly. The recent approval for Swedish to build a hospital in Issaquah highlights the need for reform.

Swedish began the CON application in April 2004. Getting a final decision from the state took three years — almost as long as it would take to build the hospital. Our study examined a sampling of CON applications and found the state delayed medical construction decisions by an average of 60 percent beyond the timeframe required by law.

The CON process is bafflingly complex. When a company applies for a CON it typically hires staff dedicated solely to maneuvering the application through the bureaucratic labyrinth of regulations and hearings. Applicants often are surprised at the state’s decisions, to the extent that many health-care professionals consider the process unfair and arbitrary. Public input, which the law requires the CON office to consider, is routinely ignored.

Furthermore, the CON process has become politicized as existing health-care companies use the government to thwart competition. CON fosters monopolies, as companies routinely lobby against any application they feel threatens their business. Not surprisingly then, other Eastside hospitals are protesting Swedish’s plans in Issaquah.

Our analysis revealed that not only have CON laws failed to reduce health-care costs and increase access, but in many cases they have had the opposite effect. A 2004 report by the Federal Trade Commission concluded that CON has failed to lower health-care costs because it stifles competition and innovation. Our state’s Joint Legislative Audit and Review Committee found CON to be ineffective and even counterproductive.

In spite of the evidence that CON has failed, a 2006 legislative task force recommended that Washington expand CON laws and make them even more restrictive. If the Legislature enacts these recommendations, Washington’s inflexible health-care system will not be able to adapt to rising demand as the baby boomer generation begins to retire and more people move to the suburbs.

Five-sixths of our economy is managed by an open market, delivering such essential goods as food, housing and clothing. Imagine if the state had to determine that a “need” existed before a new grocery store, clothing store or house could be built. Yet that is the logic the government uses with health care.

Washington needs exactly what CON was designed to prevent: a nimble, community-responsive health-care system that readily adapts to changing needs. Bureaucratic red tape, inflexible planning and regulatory barriers that keep competitors out cannot achieve this.

Today, one-third of Americans live in the 14 states with no CON laws. Washington should join them and repeal its CON program. Government central planning has failed. It is time for the state to allow a true market so that competition and innovation can reduce costs, increase access and improve the quality of health care in Washington.

John Barnes is a policy analyst with the Washington Policy Center, a nonprofit, public policy research and education organization. For the full Certificate of Need study, contact WPC at 888-972-9272 or online at www.washingtonpolicy.org.

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