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Certificate of Need: Access Denied

One intended purpose of Certificate of Need (CON) laws is to increase medical care accessibility to people by encouraging the expansion of medical facilities into rural areas and by decreasing costs that would prevent people from seeking care.  CON laws try to do this by creating committees that oversee the creation and expansion of medical facilities.  Existing establishments seeking to expand or individuals wanting to start a new medical practice must submit an application to the CON section of the Department of Health and Human Services which will review the application and decide whether or not the purchases requested are needed in the area.  Usually, applications in similar areas are grouped together so that the CON section can decide on which entity, if any, will be allowed to build the requested facility.

The argument for Certificate of Need is that improved government planning can both limit costs caused by duplicative services and encourage the development of healthcare facilities in areas with limited access; areas that are typically rural and with poorer populations.  However, CON laws have not lived up to their claims—most definitely not in North Carolina.

The premise that placing regulatory burdens on the creation of new medical facilities will increase availability of medical services to communities without them is inherently contradictory.  By forcing potential medical care providers to go through an application process, CON both delays and discourages the development of new facilities in rural areas.  Furthermore, CON laws do not provide any additional incentives to medical providers to locate in areas where medical facilities have determined they cannot raise the revenue to sustain their business.  Large established hospitals working through the CON process often bypass the rural access goal of the CON law through a method known as ‘stacking’.  Stacking is a means by which hospitals couple (claiming to serve both) an urban county to an adjacent rural county with lower paying populations in order to maintain their wealthy clientele while allowing their Certificate of Need applications to still seem attractive.  By attaching themselves to rural counties, they are able to claim expansions to existing facilities in urban counties benefit members of these rural areas and use this claim to further their application’s chances of approval.  However, the new services are still usually located around the urban hospital and remain less accessible to individuals living in rural districts.  This method, while legal, significantly weakens the ability of CON laws to expand healthcare to rural areas and discourages physicians from opening their own practices in these rural areas due to competition for CON approval from the stacking hospitals.

A blatant example of the failure of North Carolina’s Certificate of Need system is illustrated by an attempt by three neurologists to establish an MRI machine in Garner, NC.  They would have created a local facility, called Carolina Imaging Associates, to perform MRI’s and claimed they would be able to offer a cheaper price than hospitals in the region.  Despite the facility’s potential ability to decrease costs on residents of Garner and surrounding counties, its application was denied.  Established hospitals Duke University Health System and WakeMed (the eventual winner of the certificate for the MRI machine) had a vested interest in seeing the effort fail, given the pressure the new facility would have placed on them to lower costs and provide more efficient services.

It would seem the current CON system lends itself to crony capitalism by favoring established hospital enterprises that operate as large cartels preventing smaller providers from competing.  The fact that the CON advisory board is not fully subject to the Government Ethics Act reinforces that impression of impropriety.

An American Medical Association study of individuals suffering from Acute Myocardial Infarctions (AMI), or heart attacks, in states with CON laws versus states without them lends evidence of a CON system’s inability to increase accessibility.  Using Medicare patient data, researchers compared the ability of AMI patients to receive revascularization surgery (a surgery which alters blood vessels in order to increase blood flow to organs) to the variance in stringency of state CON laws.  In this study, researchers found that the less stringent the CON laws of a state, the greater the chance of being admitted to a hospital that performed revascularization surgery.  Conversely, patients in states with more strict CON laws had a higher chance of being transferred to a different hospital authorized to perform the procedure.

CON advocates might dismiss that point as obvious by claiming that certificates prevent that type of duplicated service without effecting quality of care. However, the study also found that the likelihood of AMI patients receiving revascularization surgery within the first two days of admission was inversely related to the stringency of CON laws.  “In aggregate, these findings indicate that the lower overall use of revascularization in states with certificates of need is primarily driven by the fewer number of hospitals that offer such services.”  Or in other words, the decrease in surgeries is the result of the decrease of supply, not demand.

Furthermore, certificate of need may also limit patient access to more experimental surgery, says the American Medical Association’s report:

The impact of certificate of need on the use of early revascularization tended to be greater for patients with a principal diagnosis of subendocardial AMI, a group of patients for whom the clinical benefits of revascularization following AMI are less clear.

This suggests that CON especially prevents a new subset of patients from accessing treatment to life-threatening conditions.  In almost any circumstance, when faced with death, people will choose to endure most procedures in order to live.  Furthermore, by reducing the availability of experimental treatments, CON stifles medical innovation.  While some may argue that such treatments encourage doctors to take advantage of the trust of patients who are likely not as well informed as their doctors, many patients are still likely willing to try experimental procedures in which the benefits of success outweigh the costs.  In addition, insurance agencies also provide a buffer to overuse of experimental treatments by choosing to not cover treatments that they find ineffective or risky.

While the study does not find a notable difference between mortality rates of states with and without CON laws, the study does find that individuals in CON states are more likely to have to wait longer to receive their surgery.   They are also more likely to have to make more trips to possibly multiple hospitals due to the nearest hospital’s lack of a necessary procedure.  While this study focuses on Medicare patients, it still illustrates the burden CON laws place on individuals who require specialized care but cannot receive it in timely or convenient fashion due to limitations resulting from CON.

One would be hard pressed to argue that North Carolina’s Certificate of Need has effectively increased access to care for individuals living in rural or poor areas.  By failing to provide incentives to expand to these areas while adding the significant disincentive of a lengthy and expensive application process and catering to established hospitals, CON creates an even more hazardous environment to the expansion of healthcare to the needy.

This article was posted in Healthcare by Paul Valone on September 19, 2011 at 9:58 AM.

© 2011 The Civitas Institute. Visit us on the web at www.nccivitas.org.
This article can be found at http://www.nccivitas.org/2011/certificate-of-need-access-denied/

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