Certificate of Need Laws in Health Care: Past, Present, and Future.

Certificate of need (CON) laws limit the supply of health care services in about two-thirds of U.S. states. The regulations require those who wish to offer new services or expand existing services to first prove to a regulator that the care is needed. While advocates for the regulation have offered several rationales for its continuance, the balance of evidence suggests that the rules protect incumbent providers from competition at the expense of patients, payors, and would-be competitors. In this article, I review the history of CON laws in health care, summarize the large literature evaluating them, and briefly sketch options for reform.JEL Classification: I11, I18, H75.

Assessing the Efficacy of Certificate of Need Laws Through Total Joint Arthroplasty.

ABSTRACT: Lawmakers suggest Certificate of Need (CON) laws' main goals are increasing access to healthcare, increasing quality of healthcare, and decreasing healthcare costs. This retrospective database study aims to evaluate the effectiveness of CON through analysis of total knee, hip, and shoulder arthroplasty (TKA, THA, and TSA, respectively). A review was performed using the Humana Insurance PearlDiver national database from 2007 to 2015. Access to care was approximated by the rates of total joint arthroplasty (TJA) in patients diagnosed with arthritis to the corresponding joint. The quality of care was assessed using complication rates after TJA. The total cost of TJA was approximated from average reimbursement to the healthcare facility per procedure. Patients in states without CON programs received TKA, THA, and TSA more frequently (p < .0001, p = .250, p = .019). No significant difference was found in studied complication rates between CON and non-CON states. Similarly, there was no trend found when comparing the cost of each procedure in CON versus non-CON states. These findings are consistent with other recent studies detailing the impact of CON regulation on THA and TKA. The apparent nonsuperiority of CON states in achieving their purported goals may call into question the effectiveness of additional bureaucracy and regulation, suggesting a need for further examination.

Association of State Certificate of Need Regulation With Procedural Volume, Market Share, and Outcomes Among Medicare Beneficiaries.

Importance: Certificate of need laws provide state-level regulation of health system expenditure. These laws are intended to limit spending and control hospital expansion in order to prevent excess capacity and improve quality of care. Several states have recently introduced legislation to modify or repeal these regulations, as encouraged by executive order 13813, issued in October 2017 by the Trump administration. Objective: To evaluate the difference in markers of hospital activity and quality by state certificate of need status. These markers include hospital procedural volume, hospital market share, county-level procedures per 10 000 persons, and patient-level postoperative outcomes. Design, Setting, and Participants: A cross-sectional study involving Medicare beneficiaries aged 65 years or older who underwent 1 of the following 10 procedures from January 1, 2016, through November 30, 2018: total knee or hip arthroplasty, coronary artery bypass grafting, colectomy, ventral hernia repair, lower extremity vascular bypass, lung resection, pancreatic resection, cystectomy, or esophagectomy. Exposures: State certificate of need regulation status as determined by data from the National Conference of State Legislatures. Main Outcomes and Measures: Outcomes of interest included hospital procedural volume; hospital market share (range, 0-1; reflecting 0%-100% of market share); county-level procedures per 10 000 persons; and patient-level postoperative 30-day mortality, surgical site infection, and readmission. Results: A total of 1 545 952 patients (58.0% women; median age 72 years; interquartile range, 68-77 years) at 3631 hospitals underwent 1 of the 10 operations. Of these patients, 468 236 (30.3%) underwent procedures in the 15 states without certificate of need regulations and 1 077 716 (69.7%) in the 35 states with certificate of need regulations. The total number of procedures ranged between 729 855 total knee arthroplasties (47.21%) and 4558 esophagectomies (0.29%). When comparing states without vs with certificate of need regulations, there were no significant differences in overall hospital procedural volume (median hospital procedure volume, 241 vs 272 operations per hospital for 3 years; absolute difference, 31; 95% CI, -27.64 to 89.64; P = .30). There were no statistically significant differences between states without vs with certificate of need regulations for median hospital market share (median, 28% vs 52%; absolute difference, 24%; 95% CI, -5% to 55%; P = .11); procedure rates per 10 000 Medicare-eligible population (median, 239.23 vs 205.41 operations per Medicare-eligible population in 3 years; absolute difference, 33.82; 95% CI, -84.08 to 16.43; P = .19); or 30-day mortality (1.17% vs 1.33%, odds ratio [OR], 1.04; 95% CI, 0.93 to 1.16; P = .52), surgical site infection (1.24% vs 1.25%; OR, 0.93; 95% CI, 0.83 to 1.04; P = .21), or readmission rate (9.69% vs 8.40%; OR, 0.80; 95% CI, 0.57 to 1.12; P = .19). Conclusions and Relevance: Among Medicare beneficiaries who underwent a range of surgical procedures from 2016 through 2018, there were no significant differences in markers of hospital volume or quality between states without vs with certificate of need laws. Policy makers should consider reevaluating whether the current approach to certificate of need regulation is achieving the intended objectives and whether those objectives should be updated.

Certificate of need laws: a systematic review and cost-effectiveness analysis.

BACKGROUND: Certificate of Need (CON) laws, currently in place in 35 US states, require certain health care providers to obtain a certification of their economic necessity from a state board before opening or undertaking a major expansion. We conduct the first systematic review and cost-effectiveness analysis of these laws. METHODS: We review 90 articles to summarize the evidence on how certificate of need laws affect regulatory costs, health expenditures, health outcomes, and access to care. We use the findings from the systematic review to conduct a cost-effectiveness analysis of CON. RESULTS: The literature provides mixed results, on average finding that CON increases health expenditures and overall elderly mortality while reducing heart surgery mortality. Our cost-effectiveness analysis estimates that the costs of CON laws somewhat exceed their benefits, although our estimates are quite uncertain. CONCLUSIONS: The literature has not yet reached a definitive conclusion on how CON laws affect health expenditures, outcomes, or access to care. While more and higher quality research is needed to reach confident conclusions, our cost-effectiveness analysis based on the existing literature shows that the expected costs of CON exceed its benefits.

Do certificate of need regulations impact total shoulder arthroplasty volumes and associated complication rates?

Objectives: Certificates of Need (CON) laws were introduced to improve resource utilization and reduce unnecessary health-care expansion. While many states have repealed their use, the debate continues as to their efficacy in achieving these goals. As such, we asked: 1) Are there differences in TSA incidence in CON/non-CON states? 2) Are there differences in procedural charges or reimbursement between CON/non-CON states? 3) Are there differences in the proportion of cases treated in high-, mid- or low-volume facilities between groups? 4) Are there differences in complications and length-of-stay (LOS) between high-volume and low-volume facilities? Methods: The 100% Medicare Standard Analytic files were queried for all TSA between 2005 and 2013, with minimum 1-year follow-up. Publically available data was used to identify states that upheld or repealed CON regulations, and comparisons were subsequently made between groups for normalized incidence of TSA per year and procedural charges and reimbursement rates. Comparisons were then made regarding the distribution of high-, mid- and low volume facilities, post-operative complication rates, and length-of-stay (LOS) between the different volume centers. Results: 167,288 patients undergoing TSA were identified. Normalized rates of TSA increased in both groups. Non-CON states had higher per-patient reimbursement, but paradoxically lower reimbursement rates compared with CON states. CON regulations lead to a greater proportion of procedures being performed in high-volume facilities compared with non-CON (p = 0.002). Finally, 30-day and 1-year complications, and length-of-stay, were significantly lower in high-volume facilities versus low-volume facilities (p ≤ 0.016). Conclusions: Where upheld, CON regulations contributed to a notable increase in the percentage of procedures performed in high-volume facilities, which in turn lead to a significant reduction in post-operative complications and LOS. Further study is necessary to definitely establish this relationship and the utility of CON regulations for the delivery of TSA care, particularly as it relates to clinical outcomes.

Does certificate of need law enhance competition in inpatient care market? An empirical analysis.

This article investigates the impact of Certificate of Need (CON) laws on competition in the inpatient care market. One of the major criticisms of these laws is that it may hinder competition in the health care market, which can lead to higher prices. However, from a theoretical standpoint, CON laws could also promote competition by limiting excessive expansion from incumbents. Our main conclusion is that CON laws by and large enhanced competition in the inpatient market during the period of our study. This indicates that the effects of CON laws to hinder predatory behavior could dominate its effects of preventing new entrants into the inpatient care market. We do not find statistically significant evidence to reject the exogeneity assumption of either CON laws or their stringency in our study. We also find factors such as proportion of population aged 18-44, proportion of Asian American population, obesity rate, political environment, etc., in a state significantly impact competition. Our findings could shed some light to public policy makers when deciding the appropriate health programs or legislative framework to promote health care market competition and thereby facilitate quality health care.

Certificate-of-Need State Laws and Total Hip Arthroplasty.

BACKGROUND: Many states have certificate-of-need (CON) programs requiring governmental approval to open or expand healthcare services, with the goal of limiting cost and coordinating utilization of healthcare resources. The purpose of the present study was to evaluate the associations between these state-level CON regulations and total hip arthroplasty (THA). METHODS: States were designated as CON or non-CON based on existing laws. The 100% Medicare Standard Analytic Files from 2005 to 2014 were used to compare THA procedure volumes, charges, reimbursements, and distribution of procedures based on facility volumes between the CON and non-CON states. Adverse postoperative outcomes were also analyzed. RESULTS: The per capita incidence of THA was higher in non-CON states than CON states at each time period and overall (P < .0001). However, the rate of change in THA incidence over the time period was higher in CON states (1.0 per 10,000 per year) compared to non-CON states (0.68 per 10,000 per year) although not statistically significant. Length of stay was higher and a higher percentage of patients received care in high-volume hospitals in CON states (both P < .0001). No meaningful differences in postoperative complications were found. CONCLUSION: CON laws did not appear to have limited the growth in incidence of THA nor improved quality of care or outcomes during the study time period. It does appear that CON laws are associated with increased concentration of THA procedures at higher volume facilities. Given the inherent potential confounding population and geographic factors, additional research is needed to confirm these findings.

The Effect of Certificate of Need Laws on All-Cause Mortality.

OBJECTIVE: To test how Certificate of Need laws affect all-cause mortality in the United States. DATA SOURCES: The data of 1992-2011 all-cause mortality are from the Center for Disease Control's Compressed Mortality File; control variables are from the Current Population Survey, Behavioral Risk Factor Surveillance System, and Area Health Resources File; and data on Certificate of Need laws are from Stratmann and Russ (). STUDY DESIGN: Using fixed- and random-effects regressions, I test how the scope of state Certificate of Need laws affects all-cause mortality within US counties. PRINCIPAL FINDINGS: Certificate of Need laws have no statistically significant effect on all-cause mortality. Point estimates indicate that if they have any effect, they are more likely to increase mortality than decrease it. CONCLUSIONS: Proponents of Certificate of Need laws have claimed that they reduce mortality by concentrating more care into fewer, larger facilities that engage in learning-by-doing. However, I find no evidence that these laws reduce all-cause mortality.

Weighing CON laws against push for greater price transparency.

Controversial certificate-of-need laws could be replaced with regulations that offer transparency around prices and outcomes to encourage competition in markets, some economists say.

The Impact of Certificate-of-Need Laws on Nursing Home and Home Health Care Expenditures.

Over the past two decades, nursing homes and home health care agencies have been influenced by several Medicare and Medicaid policy changes including the adoption of prospective payment for Medicare-paid postacute care and Medicaid-paid long-term home and community-based care reforms. This article examines how spending growth in these sectors was affected by state certificate-of-need (CON) laws, which were designed to limit the growth of providers and have remained unchanged for several decades. Compared with states without CON laws, Medicare and Medicaid spending in states with CON laws grew faster for nursing home care and more slowly for home health care. In particular, we observed the slowest growth in community-based care in states with CON for both the nursing home and home health industries. Thus, controlling for other factors, public postacute and long-term care expenditures in CON states have become dominated by nursing homes.

How Do Hospitals Respond to Market Entry? Evidence from a Deregulated Market for Cardiac Revascularization.

Regulatory entry barriers to hospital service markets, namely Certificate of Need (CON) regulations, are enforced in many US states. Policy makers in other states are considering reinstating CON policies in tandem with service expansions mandated under the Affordable Care Act. Although previous studies examined the volume effects of CON, demand responses to actual entry into local hospital markets are not well understood. In this paper, we empirically examine the demand-augmenting, demand-redistribution, and risk-allocation effects of hospital entry by studying the cardiac revascularization markets in Pennsylvania, a state in which dynamic market entry occurred after repeal of CON in 1996. Results from interrupted time-series analyses indicate demand-augmenting effects for coronary artery bypass graft (CABG) and business-stealing effects for percutaneous coronary intervention (PCI) procedures: high entrant market share mitigated the declining incidence of CABG, but it had no significant effect on the rising trend in PCI use, among patients with coronary artery disease. We further find evidence that entry by new cardiac surgery centers tended to sort high-severity patients into the more invasive CABG procedure and low-severity patients into the less invasive PCI procedures. These findings underscore the importance of considering market-level strategic responses by hospitals when regulatory barriers are rescinded.

Effect of certificate of need law on emergency department length of stay.

BACKGROUND: The impact of the Certificate of Need (CON) law on Emergency Department (ED) care remains elusive in the academic literature. OBJECTIVES: We study the impact of CON law on ED Length of Stay (LOS). METHODS: We examine ED LOS to detect any statistically significant difference between CON and non-CON states. We then estimate the effects of CON law on ED LOS by treating CON as an exogenous (endogenous) variable. RESULTS: We find that the CON legislation positively impacts ED care by reducing ED LOS (95% confidence interval [CI] -61.3 to -10.3), and we can't reject the hypothesis that the CON legislation can be treated as an exogenous variable in our model. An increase in the stringency of the CON law (measured by the threshold on equipment expenditure that is subject to a CON review) tends to diminish this positive impact on ED LOS (95% CI 9.9-68.0). The party affiliation of the Governor (95% CI 10.3-37.5), the political environment as a function of the agreement on voting between state senators (95% CI-64.8 to -12.9), proportion of young population (0-17 years) when compared with the elderly (>65 years) (95% CI-2299.7 to -184.1), proportion of population covered by privately purchased insurance (95% CI-819.3 to -59.9), etc., are found to significantly impact ED LOS in a state. CONCLUSION: This study provides a better understanding of the impact of CON law on ED care, which extends the previous literature that has mainly focused on CON effects on inpatient care.