Do We Need Certificate of Need?

Published March 21, 2013

By Tom Campbell

by Tom Campbell

In the 1970’s, the federal government mandated that most medical service providers, including hospitals, doctor’s offices, long term care facilities and others obtain a certificate of need in order to operate. In the 1980’s, the feds removed the requirement and many states eliminated their certificate of need laws, but North Carolina actually tightened requirements and is one of the most restrictive states in the country. The CON requirement that was once designed to prevent hospitals from over-building and over-spending on expensive equipment now appears to be an impediment to competition and unnecessary protection for existing hospitals.

That might be changing. House Bill 177 would allow single specialty ambulatory surgery centers to perform procedures like tonsillectomies, cataract surgeries, orthopedic surgeries and other procedures outside a hospital. It is modeled after a 2005 bill that made it easier for colonoscopies and endoscopies to be performed in the offices of gastroenterologists. This 2005 legislation is cited with saving more than 200 million dollars by reducing hospital overhead and is widely praised by doctors, patients and insurance companies. Sponsors of HB 177 predict similar results.

About the only opposition to this legislation comes from the hospitals themselves, who worry that new competition would cherry-pick more profitable services, greatly reducing their revenues. This problem would be especially critical in rural communities with smaller hospitals, they say. Bill sponsors have put provisions into their legislation to protect these smaller hospitals. But should we be in the business of protecting hospitals profits?

Lawmakers are also to be applauded for taking a look at the whole issue of certificate of need. A House committee committee has approved several recommendations that would expedite or eliminate the CON review process, opening competition. One proposal would increase the limit on capital expenditures from 2 to 4 million dollars before the certificate of need review is necessary. For major equipment purchases the threshold would be raised to 1.5 million dollars and replacement equipment would be exempted altogether. To ensure that larger, more established providers don’t drag out competitive applications the committee recommended that a bond be posted for those who appeal a decision.

Caution should be the watchword and we should try to ensure we do no harm, but there is evidence it is time we greatly modify or eliminate our certificate of need process. The health and safety of our citizens must not be jeopardized. Neither should we put our hospitals in unnecessary jeopardy or unduly disadvantage them; they provide a valuable service. But that doesn’t justify allowing protectionist practices to prevent competition just so they can generate high-dollar fees. New technologies and improved procedures have been developed that are safer, less invasive and less expensive, eliminating the need for an expensive hospital stay in many instances and the benefits should accrue to the patients, not the providers.

We constantly hear that our healthcare system is unsustainable and that we cannot continue to spend almost 18 percent of our gross domestic product on healthcare. We must find ways to take costs out of the system while protecting patients. Same-day outpatient surgery centers and revised certificate of need reviews would appear to be steps in the right direction.

March 21, 2013 at 8:26 pm
Alex Mullineaux says:

I think you are missing a few key points. Like, what about the millions in charity care that community hospitals provide along with the 24 hour emergency room services? Will freestanding specialty surgery centers be required to provide that? And if they are, to some degree, how will it be enforced? I think you should do a show on the topic and have a representative from the NCHA on to counterpoint.

March 22, 2013 at 5:54 pm
dj anderson says:

If we eliminate certificates of need, and have competition, will that mean seeing hospitals closing due to competition? Would that be a bad thing if costs were reduced?

Would it mean chain hospitals coming in and taking over? Would that be a bad thing if costs were reduced?

Just hurts to see a hospital sink...

March 22, 2013 at 6:04 pm
dj anderson says:

Tom has a winning argument for change, swaying me, but where are the comments contrary (beyond Tom's stated ones)?

March 22, 2013 at 11:54 pm
Tom Hauck says:

The following links support your final paragraph above.

The first two links are reports by experts -- the first by Dr. Donald Berwick, the former head of CMS (Medicare and Medicaid) in the NY Times and the second reporting a formal study by the IOM or Institute of Medicine -- the health part of the National Academies.

These two support each other and are reporting that about 30% of the medical expenditures each year are wasted and the total waste is about $750 Billion (with a B) each year. That is more than our defense budget of about $550 billion.

This third link is a new one I just found and is reporting on 135 medical tests that are often requested but, according to the individual Medical Associations, are often unnecessary or cheaper alternatives are available. They are being reported as part of reducing the $750 Billion in waste. These are being prepared and disseminated with the help of the Consumer Reports organization.