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Are Certificate of Need Laws Relevant in Delaware’s Healthcare Marketplace?

By: Jane Brady, Chair, A Better Delaware

You may have never heard of a Certificate of Need (CON) if you do not work in healthcare in Delaware. Yet, these requirements within CON regulations can affect your access to, and the cost and quality of, patient care you receive.

The law adopting a Certificate of Need requirement, now called a Certificate of Public Review in Delaware, was intended to improve access, costs, and the quality of care for patients, generally in hospitals and nursing homes. The law has failed to achieve those goals.

A Certificate of Need is a regulation that requires healthcare providers to get permission from the state before adding or expanding the type of services they offer or before acquiring expensive equipment, building new facilities, or expanding existing ones. Upon passage of an Act of Congress, certificate of need laws were passed by 49 of the 50 states in the early 1980s.

Over the intervening years, research has shown that the goals the laws sought to achieve were not reached, and many states now have repealed the certificate of need statutes. In fact, even Congress repealed the law that compelled states to adopt a certificate of need law – in 1986!! Yet, like many other states, Delaware still has the requirement in place. It should be repealed.

There have been studies of the impact of certificate of need laws. The Kaiser Family Foundation did a study that found that states that have certificate of need requirements had 11% higher healthcare costs than states that did not have it. An additional study by George Mason University found that there were 30% fewer hospitals per 100,000 residents in states that had a certificate of need requirement. Additionally, rural areas, with smaller, localized populations, were more poorly served.

Certificate of need laws are structurally flawed. They limit competition. They allow the state to pick “winners” and “losers,” with the existing facilities having the political connections and favor to “win.” The certificate of need restricts who can participate in competing for your healthcare choices and as a result, there is no incentive to be innovative or even cost-conscious when they appeal to you as you make your health care choices. When businesses compete for you to choose their services, they will try and find the most cost-effective way to give you a product that you want, when you want it. Without competition, there is no need to be responsive to your demand for a specific service or to be more cost-effective. You get what they have decided to provide at the price they decide to charge.

Importantly, access includes timeliness. Recently, CMS, the company that manages Medicare and Medicaid nationally, conducted a study of emergency room wait times in all 50 states and the District of Columbia. Delaware ranked 47 out of 51, with an average wait time for emergency room services of over three hours.

It is good governance to eliminate certificate of need laws. Since the laws were passed, the government has taken a much larger role in providing health care.

In an attempt to assure continuing use of these competition – limiting laws, advocates claim they are necessary for more effective care for indigent patients. It was not one of the original stated goals of the legislation but has been used to try and justify retaining these laws on the books. However, if you wish to help the indigent access health care, and most would accept that is a desirable social goal, the best course is to require the expenditure of public funds for that purpose to be transparent and accountable. Currently, the way reimbursements are being made, the hospitals effectively become a smokescreen, and the public cannot discern easily where and how the money is being spent.

The absurd argument some of those who favor using certificate of need laws to help fund indigent services argue is that if you restrict the amount of healthcare available, the healthcare providers who are lucky enough to be in the market can charge higher rates to the people with private insurance, and that will subsidize the care for poor patients without any insurance.  Maybe a day long ago when providers actually decided what health care would cost.

Now, Medicare and Medicaid have changed the economic environment in which healthcare is provided and costs are highly regulated. In truth, Certificate of Need laws are now essentially outdated for any purpose. Delaware should repeal the laws providing for a Certificate of Public Review, our equivalent of a Certificate of Need, and allow the health care providers of our state compete fairly to provide the public, timely, the quality health care they need and want.

Jane Bady serves as Chair of A Better Delaware.She previously served as Attorney General of Delaware and as a Judge of the Delaware Superior Court.