A Dose of Healthy Competition: The Call to Repeal Certificate of Need

One of the key healthcare issues of the 2019 Florida legislative session is the repeal of our state’s outdated and ineffective Certificate of Need (CON) program. Bills are being debated in the House (HB 21) and the Senate (SB 1712).

Established in the fee-for-service environment of the 1970s, CON requires hospitals to obtain state approval before adding facilities or expanding services. The purpose of this regulatory process was to stem rising costs, especially within Medicare and Medicaid programs, largely by controlling duplication of healthcare facilities and services. In 1974, federal legislation made federal funds contingent on the implementation of CON programs.

Growing evidence points to the failure of CON to produce cost savings, higher quality healthcare, or greater access to care.

By 1986, CON regulations were deemed ineffective, and the federal government repealed its mandate and encouraged all states to follow suit. To date, 15 states have heeded the call. Our reimbursement systems have changed significantly in the last three decades, and growing evidence points to the failure of CON to produce cost savings, higher quality healthcare, or greater access to care. Many states including Florida, however, continue to maintain substantial CON requirements.

CON Does Not Deliver

Proponents maintain that the CON process might increase healthcare quality by funneling more procedures through fewer providers and creating greater levels of expertise. A 2016 study by Thomas Stratmann, Ph.D. and David Wille of the Mercatus Center at George Mason University, found that CON laws actually diminish quality.

Based on data from 900 hospitals between 2011 to 2015, patients in states with CON laws receive worse healthcare than patients in states without them. Higher mortality rates for pneumonia, heart failure, heart attack and post-surgical complications were observed at hospitals in CON states.

The goal of lower healthcare costs through CON has also failed to materialize. A recent report from the Department of Health and Human Services, in collaboration with several federal agencies, Mounting evidence shows that CON laws are not effective in controlling costs, and in fact, increase per-unit healthcare costs. In fact, the Federal Trade Commission and the Antitrust Division of the Justice Department have long supported the repeal of CON laws, which “create barriers to entry and expansion, limit consumer choice, and stifle innovation.” It’s time for Florida to follow 15 other states in repealing CON requirements in our state. Additional research from the Mercatus Center also suggests that greater competition incentivizes providers to become more efficient.

Furthermore, the Federal Trade Commission and the Antitrust Division of the Justice Department have long supported the repeal of CON laws. In a joint statement issued in 2017, the agencies describe how CON laws “create barriers to entry and expansion, limit consumer choice, and stifle innovation.”

A Way Forward

It is time for Florida to embrace value-based care initiatives and competition-fueled innovations, not CON, to reduce cost and improve healthcare quality and access. Other sectors of the economy are able to benefit from the role of competition. Healthcare should be no exception. Cleveland Clinic wants to compete on value. That means providing higher quality care and better service that is affordable, while pursuing innovation and supporting patient choice.

I agree with proponents of CON when they say that some free-market principles are a poor fit when trying to deliver quality care to patients. But I do not think competition is one of those principles. There are too many examples of competition-driven innovations and quality improvements to deny we need competition in healthcare to move the ball forward.

Through value-based care, providers and payers have incentives and outcome measures designed to promote efficient, effective care and avoid expensive duplication of services. Today, healthcare consumers also have more tools and information to help choose the best quality and value in the care they receive, though arguably, more works needs to be done. 

Providing the right care in the appropriate setting is another important free-market approach to controlling cost. Cleveland Clinic is a proponent of the “hub-and-spoke” model that keeps hospital-based care focused on the most complex care while improving access to primary and secondary care in community settings.

Private-sector innovations in telemedicine and other technology are also improving access and patient outcomes while lowering costs. Cleveland Clinic offers virtual access to doctors via smartphone and other devices for primary care needs. For complex care, we have integrated telemedicine systems to extend the reach of specialty care expertise while helping control costs.

CON supports hospital systems looking to impede competition but does not increase quality and access or decrease cost of care. Florida legislators need to put patients first and eliminate CON.