West Virginia's certificate of need laws need repealed, expert says

By Karen Kidd | Oct 14, 2016

CHARLESTON  – An economics professor predicts that West Virginia would be better off without the almost 40-year-old certificate of need laws.

CHARLESTON  – An economics professor predicts that West Virginia would be better off without the almost 40-year-old certificate of need laws.

"The states that still have these laws should consider repealing them," Thomas Stratmann, Mercatus Center scholar and professor of economics and law at George Mason University, told The West Virginia Record.

Stratmann co-wrote with research fellow Christopher Koopman the Mercatus expert commentary "Little-Known State Laws Are Hurting Patients and Making Hospitals Worse," which took aim at CON laws, including those still enforced in West Virginia.

"It has become increasingly clear that these laws have failed to achieve their goal," the article said. "And if that isn’t enough reason to be skeptical, we are now beginning to understand the real effect they have on the provision of health care in America. It isn’t pretty: CON laws may be diminishing hospital quality and even raising death rates in some cases."

Originally devised more than 50 years ago to reduce healthcare spending, CON laws have proven to increase costs in those states that still have them, including West Virginia, while those states that no longer have them have seen a reduction in overall healthcare costs fall, Stratmann and other experts say. Today, 15 states no longer have CON laws.

"And in those states, patients have greater access to medical care," Stratmann said. 

West Virginia was not the first state to buy into CON laws. In 1964, New York became the first U.S. state to adopt laws that placed in the hands of state government decisions over whether new hospitals or assisted living facilities were required. Four years later, the American Hospital Association began to push for such laws in other states and it was during that initiative that CON laws came about.

The following decade, Congress passed the Health Planning and Resources Development Act of 1974, which required all states to implement procedures to review and approve any major capital projects in the health care industry. The federal government provided federal funds for health planning to those state who adopted CON laws.

West Virginia soon found itself under considerable pressure from the federal government to accept CON laws, which the state legislature did in 1977.

In 1987, the act was repealed, the federal funding was withdrawn and 14 states dropped their CON programs over the next 10 years. Today, West Virginia is among 36 states, along with the District of Columbia and Puerto Rico, that still have CON programs. In those states, health care providers cannot open a new practice or expand services until they have the state's permission.

That, in turn, serves to limit health care availability in those states that still have CON laws.

"They limit access to medical care," Stratmann said. "That means patients must endure longer waiting times, patients have longer travel times and patients don't have access to as high a quality medical care as they could have in states that do not have these laws."

West Virginia's CON laws are especially arduous because they are so complex, Stratmann said. The state has 21 types of CON laws and regulations, applications of up to 6,000 pages and filing fees as high as $35,000.

"Often you need to have legal help just to file and be successful in the process," he said.

That's often enough to cause health care providers to not try at all, which means states with CON laws often are behind in the latest medical research and technology, leaving patients with high rates of readmission, at greater risk of complications and suffering higher rates of mortality. The system discourages new facilities from establishing themselves in states with CON laws, which provides existing medical facilities a quasi-monopoly, Stratmann said.

"Those existing hospitals have less incentive to compete for patients by, for example, offering higher quality care," Stratmann said.

The implications for West Virginia are especially dire, Stratmann indicated in another Mercatus article he wrote with Koopman and program manager Mohamad Elbarasse, "Certificate-of-Need Laws: Implications for West Virginia." The article cited Mercatus research that demonstrates the consequences of a West Virginia where CON laws continue to be enforced. That research suggests the state could have approximately 2,424 fewer hospital beds, between four and seven fewer hospitals that offer MRI services and between 13 and 16 fewer hospitals that offer computed tomography (CT) scans.

"For those seeking quality health care throughout West Virginia, this means less competition and fewer choices, without increased access to care for the poor," the article said.

It is a far cry from the original presumed promise that CON laws would control costs, according to that article.

"However, 40 years of evidence demonstrate that these programs do not achieve their intended outcomes, but rather decrease the supply and availability of health care services by limiting entry and competition," the article said. "For policymakers in West Virginia, this situation presents an opportunity to reverse course and open the market for greater entry, more competition and ultimately more options for those seeking care."

Bills to reform – but not repeal – some of the state's CON laws were introduced into the West Virginia state legislature in February. Senate Bill 68, sponsored by state senators Ryan Ferns (R-Ohio County) and Tom Takubo (R-Kanawha County) was introduced to the state's code so that the jurisdiction of the board or authority overseeing rates for health services ceases to exist. The legislation passed both chambers of the state legislature and was signed by the governor the following month.

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American Hospital Association George Mason University State of West Virginia

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