What a CON

by Marc Kilmer

JULY 19, 2011 Bookmark and Share

Let’s say you want to open a new restaurant in your town. How would you feel if you had to get state approval to open that restaurant? As part of that approval process, you had to prove that you were meeting an unmet need in the area and that your restaurant won’t have a negative impact on existing restaurants. Ridiculous, right? Well, you don’t have to take these steps to open a restaurant in Maryland (yet), but if you want to open a new health care facility (or expand an old one), this type of central planning is a requirement in the so-called “Free State.”                                          

Like many states, Maryland has a “Certificate of Need” (CON) law. It would be hard to find a law with a more apt acronym. These laws are nothing more than a con job on both health care providers and the public. They hurt consumers, increase the cost of care, and reduce the options for health care in Maryland. But, of course, it’s not like Maryland legislators who complain about the dismal state of health care are going to be repealing this law any time soon.

Because of the CON law, if you want to build a new health care facility, move or change the bed capacity of an existing facility, change the type or scope of any health care service, or make a large capital expenditure to improve your health care facility, you have to get state approval. The state will only approve these things if bureaucrats think it is needed, cost-effective, high-quality, financially viable, and won’t negatively impact other health care facilities.

Going through the process takes, in the speediest of cases, months. As part of this process, among other things you have to file a letter of intent, go to a pre-application conference, submit an application, sit for a formal review, open up a public comment period, have a project status conference, and then await a commission decision.

What is the purpose of all this governmental intervention in the health care marketplace? CON laws are supposed to help consumers, but they don’t. As the Department of Justice concluded after reviewing the evidence, CON laws “undercut consumer choice, weaken markets’ ability to contain healthcare costs, and stifle innovation.” They are supposed to contain health care costs, but they don’t.  “The empirical evidence on the economic effects of CON programs demonstrated near-universal agreement among health economists that CON laws were unsuccessful in containing healthcare costs.”

In short, these laws don’t do any good in the health care marketplace and, in fact, actually hurt consumers and drive up costs. But the law remains on the books, adding thousands (probably tens of thousands) of dollars to the cost of health care facilities and delaying new construction by months and perhaps years.

There is a misconception among the general public that we have something like a free market in health care. Nothing could be further from the truth. When it comes to building or expanding health care facilities, Maryland and many other states have a central planning process that would be the envy of any socialist country. In other areas, like the sale of health insurance, the government presence is just as heavy. If you are looking for the source of problems in our health care system, look no further than government interventions like CON laws.

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